Austin TX Real Estate - Hill Country Austin Lakeway Homes for Sale: Interest Rates Effect How Much Home You Can Afford

Interest Rates Effect How Much Home You Can Afford

Just how low are rates right now?  They are so low, you can buy more house today with the lowest payments ever in history!  I was talking with one of my buyers a couple of days ago. She's very concerned about mortgage payment. We've had the same discussion three times, and we go in circles. She's thinking about settling for a house today that is very cheap, and then getting a "better" house in 3-5 years.

interest rates increase houses for sale austin txEach time it's, "Rates are below 4% today. We don't know what rates will do in 3-5 years. What if you are only able to buy the same price point house at that time because rates increase so much, the payments are out of your reach?"  Each time, I get an "Ahhh, I understand..."

Here's a personal example that made my jaw hit the floor.  The very first house I bought at age 24 had a loan amount of $134k. Since I was self employed, my interest rate was 7%.  At today's rate of 3.75%, to keep the same payment that I received back then, I could have a loan amount of $192,500 today!

That's crazy!  I'm thinking, what would a 24 year old do with a $200k house?  The average prices in the area are under $200k. That means I would be able to afford a house above the "average".

I thought those numbers were astonishing!!  It boggles my mind to think how much the interest rate plays in what people can afford. With the same example above, at a 5% interest rate, I could get a loan amount of $166k and have the same payment.  $166k is a considerably different house in a very "different" neighborhood than $192,500 and definitely $134k.

1% here and there makes a huge difference! If you're thinking from the get-go that you'll just buy a "better" house later, think about how much that could cost you if you're able to actually afford that better house now.

**Are You Packed Yet?**

donna harris Realtor Austin TX blog

Donna Harris, REALTOR®
RE/MAX Austin Skyline
www.DonnaHomes.com

Donna@DonnaHomes.com
austin-texas-homes-for-sale.com

Austin TX Real Estate and the surrounding areas of Lakeway, Bee Cave, West Lake Hills, Cedar Park, Round Rock, Spicewood, Circle-C, Steiner Ranch, and everywhere in between... Hill Country Austin TX Real Estate and beyond. Whether you're buying or selling an Austin home, I'll be with you every step of the way. 

For real time Austin TX listings,click here.

** Multi-Million Dollar Producer Year after Year **


Copyright© 2011 By Donna Harris, All Rights Reserved. You may re-blog with links back to this post.

* Interest Rates Effect How Much Home You Can Afford * was first published on donnahomesblog.com.

 

Comment balloon 6 commentsDonna Harris • December 30 2011 07:03PM

Comments

It's funny Donna, I always tell people I don't care what you can afford, I only care about what you're comfortable paying.  I can afford $15 for a gallon of milk but I won't.  It's a good life.

Posted by Joe Kenny, Better Than Your Average Joe (Realty Executive Midwest) over 6 years ago

Don't you want to write this in Sharpie on people's hands so they look at it over and over until they get it! 

Great post. Happy New Year to you and your family.

Posted by Leslie Ebersole, I help brokers build businesses they love. (Swanepoel T3 Group) over 6 years ago

Christmas has Passed …..Wow it went by FastThis Year.

Thank You for being Part of My Life in the RAIN !

I Would Like To Wish You  and Your Family The Very Best Ever Year in 2012 !!!

Posted by Fred Carver Personal Real Estate Corporation, Accredited Real Estate Consultant (RE/MAX Camosun Victoria BC Real Estate) over 6 years ago

Hi Donna - It is amazing how some people will talk about their plans and their decision on why to buy, but they have not taken the time to do the math.  This is the best time in 60 years to buy, yet some still don't get it.

Posted by Susan Neal, Fair Oaks CA & Sacramento Area Real Estate Broker (RE/MAX Gold, Fair Oaks) over 6 years ago

But is it going to go lower? I remember this conversation when rates were 4.75% thinking that this was the best you could get. Hopefully it stays this way for a while!

Posted by Ellie McIntire, Luxury service in Howard County & Catonsville (Ellicott City Clarksville Howard County Maryland Real Estate) over 6 years ago

Will 2011 be the last year of record low rates? 

Posted by Dave Sullivan, Michigan Realtor with an investor viewpoint (Real Estate One) over 6 years ago

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