How Is Your Borrowing Power Affected By Interest Rate Fluctuations?

Hammond Property Group Video Blog with Brian Hammond

Small changes in interest rates can reduce your borrowing power by as much as 10%.

If you’re a homebuyer, small changes in interest rates can have a dramatic effect on how much money you can borrow.

For example, let’s assume you want to maintain a monthly mortgage payment of approximately $1,150. Let’s also assume you want to take a 30-year loan. At an interest rate of 4%, you can borrow about $240,000.

If that interest rate rose from 4% to 5%, your loan amount, to maintain the same monthly payment, would decrease to approximately $215,000. That’s an 11% to 12% reduction in borrowing power—all because of a tiny 1% rise in interest rates.

This is a lesson I tell all my clients.

This is a lesson I impart to all my clients, so beware of small changes in interest rates and how they impact your purchasing power.

If you’re in the market to buy or sell a home, I would love the opportunity to earn your business, so don’t hesitate to reach out to me. I look forward to speaking with you.