If you buy a home now, it will cost you significantly less than it did a year ago. Let’s say, for example, you buy a home priced at $200,000. You put three percent down, which for that amount is $6,000. On a 30 year loan with pretty good credit, you might get an interest rate around 3.875%.
That makes your monthly payment an estimated $1,384 a month with property taxes, homeowner’s insurance, principle and interest. If you closed today, you would pay off your home in 2049. Over 30 years you would have spent $134,496.35 in interest.
If you raise that interest rate just a quarter of a percentage point, you pay much more. Your monthly payment jumps to $1,412. In 2049 you will have paid $144,556.57 in interest. That’s over $10,000 more over the lifetime of your loan.
Adjustable rate mortgages (ARMs) offer consumers one rate for the first five years they own their home, then that rate can change based on what the Fed does with interest rates during that time frame. If you’re home buying in Texas, be careful before you sign up for that type of loan. Interest rates right now are extremely low. There’s a chance in five years they could be much higher, which means your payment would skyrocket.