How One Percent Increase in Mortgage Interest Rates Could Cost $50,000

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Steve Jolly, owner of FastRealEstateMarketing.com and NashvilleRealEstateNow.com, shared tips on the recent rise in interest rates. The recent rate hikes significantly affected purchasing power and the total cost of homeownership for millions of Americans.

Steve Jolly of Nashville Real Estate Now

Steve Jolly

When the interest rates increase from 3.5% to 4.5% on a $250,000 loan, your total cost over the life of the loan increased $51,875. This is shocking!

In the July 10, 2013 press release to the public, the Federal Reserve Bank (FED) announced that it will likely begin ending the purchase of mortgage-backed securities later this year. The FED has been purchasing up to $85 billion each month in Bonds and Mortgage Backed Securities in an attempt to promote the ailing economy and housing market. While this was anticipated at some point in the future, the stock and bond markets instantly reacted to this news. Within a week, mortgage interest rates rose close to one percent.

A one percent increase seems like an insignificant number to most people. “When the interest rates increase from 3.5% to 4.5% on a $250,000 loan, your total cost over the life of the loan increased $51,875,” Jolly stated. “This is shocking!”

In addition to the increased cost, the buyer will also realize a decrease in purchasing power of approximately 11 percent. For example, the payment on a $400,000 home a few weeks ago is now equal to a payment on a $356,000 home.

To make matters worse for buyers in Nashville; median home values have increased approximately $28,000 or 15% since the beginning of 2013. Jolly predicts that home prices will continue to rise through the end of the summer in Nashville.

“If you are considering purchasing a home in the near future, buying now can save you thousands in the long run,” Jolly continued.

For additional information on interest rates or to learn more about the Nashville Real Estate Market, go to How One Percent Can Cost $50,000. Steve Jolly is one of the top real estate brokers in the Greater Nashville Area and also owns NashvilleRealEstateNow.com.

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