What does an increase in interest rates do to my mortgage payment?

July 10th, 2009

OK, so you are a first time buyer looking to purchase a home.  In the Oakland Montclair and Oakland Hills areas the average entry level home is around $600,000.  If you were to purchase an average Oakland Montclair home with a 20% down payment  and a loan of 80% at an interest rate of 5.375%, your payment (not including taxes and insurance) would be around $2687 per month.

Now imagine the same Oakland Montclair home, the same $600,000 purchase price and the same 80% loan.  Now however the interest rates have gone up by 1%.  That small 1% increase in interest rate is going to increase your monthly payment by an enormous $306 per month.   

At today’s interest rates of (5.375% 30yr fixed) for every $100k you borrow your monthly payment is about $559/month.  If you purchase your home at a lower interest rate by just 1 percent, that means that you could borrow about $50,000 dollars more and still have a lower payments!

If you really want to get down to loan nitty-gritty I recommend that you should call a good local mortgage broker.  Ask them to run a couple of scenarios for you.  I’ve recently had some great working experience with Brian Moggan at MetLife Home Loans (510) 339-4400 or BMoggan@MetLifeHomeLoans.com .  I don’t have a vested interest in you calling him, I just know that he offers good loan products at good rates and provides  great service.

Brian Santilena has been representing home buyers and home sellers in the Oakland Hills, Berkeley Hills and Piedmont California marketplace since 1998.  He is a Realtor and CRS Certified Residential Specialist with Pacific Union Real Estate.  He is highly knowledgeable in all premier neighborhoods such as Haddon Hill, Rockridge, Montclair, Glenview, Trestle Glen, Crocker Highlands, Oakmore, Laurel District and Redwood Heights.  Please feel free to CONTACT BRIAN  if you have any real estate needs in Oakland, Berkeley or Piedmont CA.
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