Mortgages made simple…

All of the indicators, experts and swamis are telling us that mortgage rates will be on the rise soon.  Mention the word “mortgage” and people’s eyes glaze over and the yawning begins.  So let’s make this simple.  Assume for a moment that you want to purchase a home for $250,000. (I was an English major and math was never my strong suit so I’ll use round numbers.) Due to stricter lending guidelines, for every .25% (1/4 of a percent) increase in interest rates, the income that you need to earn in order to still qualify for your loan needs to go up by 3%. Let’s go with an even more eye opening example: every time rates go up a quarter of a percent, it ends up costing you $9,518 more over the life of the loan.  If you think that you’re going to wait a bit before you buy, think instead of the $38,072 that it will cost you in extra interest over the life of the loan if rates go up by a full percentage point before you decide to buy.   Ouch.

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