Home prices in Washington DC continue to rise and are projected to increase between 3.80% to 4.2% in 2019, depending on which pundit you favor. And that’s just a baseline because popular home types, price points and trending neighborhoods will experience even higher price hikes. As homes become more expensive, buyers must pay higher down payments, closing costs and mortgage payments. Higher prices can also push buyers into Jumbo loans ($679,650+) that carry even higher interest rates. Higher rates mean you’ll pay more Interest and have less buying power.
Let’s take a look at rates and their effect on buyers. Rates are predicted to increase by an additional quarter point by December 31, 2018. The Fed plans three additional rate hikes in 2019. Today’s rate of 4.85% percent can become 5.85% by this time next year.
If this doesn’t sound like a big deal, consider that a one point increase can cost borrowers up to 23% more in interest over the life of a typical 30 year mortgage. For loans of $400k and higher, that extra interest could add up to more than $100k over the life of the loan.
Let’s do the rest of the math. Read the full post