Here’s a heads up for home buyers! Interest rates have gone up and may continue to climb. The current average is 4.2 percent for a 30-year fixed rate.
Most experts believe rates will continue to inch up throughout the year. Rates could have been had for under 3 percent months ago, but those rates are probably gone even though they’re still well below typical interest rates in the last 10 years.
“It's still a perfect time to buy a house right now. But again, there's going to be a lot of volatility in the coming year. We have a new administration and new monetary policies which lead to uncertainly. The Fed monetary policies could also change. That means there’s a good possibility interest rates could climb into the fives,” said Jason Kenny, a loan originator with Caliber Home Loans.
If interest rates do go to 5 percent or above, that means a bigger monthly mortgage payment if you haven’t locked in.
Here's an example using a $329,000 home which is currently for sale in Zionsville on Avedon Way. At current interest rates, which are in the low fours, monthly payments would run just under $2,000. If the rates rise to 5 percent, you'll pay $162 more. If rates go to 5.5 percent, you'll pay $259 more per month. You can take a closer look here.
“So, waiting to buy can definitely increase your chances of paying more money for the house on a monthly payment. And over the course of a 30-year loan at 5%, you'll end up shelling out about $50,000 more total,” noted Kenny.
One way to get the best deal is to get a realtor. If you’re buying, it’s almost a no brainer because you’re not paying any fee, and a realtor will do all the work for you.
“I would encourage someone to go out and interview a few agents and look at who they match up with best and who maybe matches their personality. Then you have someone in your corner who knows your interests and who can negotiate to get you the best deal for the home,” said Brett Young, a realtor with Remax Legends Group.
If you’re selling a house, and trying to do it before interest rates go up further, you can do it yourself to save the commission. That doesn’t always save you money—sometimes it does just the opposite.
“Reports have shown selling your home with a realtor actually nets you more money in the long run, sometimes as much as 11 percent,”said Young.
Realtors can save you money because they know how to stage your home and market it. They’re unlikely to overprice your home because they know what it’s worth on the market.
If a home is overpriced, it becomes stale on the market and people wonder why isn't it moving, and that can work against you.
The final note about rising interest rates involves getting pre-approved for a mortgage that you can afford.
“Know what your anticipated payments are going to be so you're very comfortable with your budget. And once you have that particular budget, it's going to help to know what price range you should be looking in, for a property,” said Kenny.