SALT LAKE CITY — As mortgage interest rates have more than doubled over the past year, many people have become scared how it will affect their home-buying power.
Interest rates directly impact house payments, but how much more will today's buyer be forced to pay?
"You'll have a higher payment for sure, you get higher interest means higher payment," explained Burt Hoagland, a loan officer at Intercap Lending.
The math doesn't lie when crunching the numbers, and Hoagland suggests prospective buyers lay out the work on paper to see for themselves.
For example, a buyer who purchased a $500,000 home about a year-and-a-half ago with 20% down and locked in at a common and low interest rate for the time of 3.25% would have a monthly payment of about $1,740.
Compare the same transaction but with a jump in rate and homebuyers are faced with a $722 a month difference in mortgage payment all because of the interest rate over the course of a 30-year loan, which equates to an extra $259,920 out-of-pocket for the life of the loan.
But today's rate reality is not all bad.
Josh Romney, the chairman of Intercap Lending, believes real estate is still one of the greatest ways to gain wealth. With Utah's hot market, purchasing now while home prices are slightly down and with no bidding wars, buyers could still come out ahead even with higher interest rates.
"[Buyers can] refinance in the next two years or so. I think that's a really good opportunity and really good chance that you will be able to refinance and have the lower price home and the lower rate," said Romney.
He also pointed out that in the current market, sellers are commonly paying closing costs for the buyers, which is an additional reason to weigh into the "buy now" category with the option to refinance to a lower rate at any time
Buyer beware, though. Time is of the essence.
"Once rates come down, you have really missed the opportunity in this housing market because when rates come down, housing prices are going to start exploding again," Romney said, "and so the real opportunity to get in and buy the house before rates come down because once they come down it's a little too late."
