There are many moving parts to purchasing a home - two of them are the purchase price of the home and the mortgage rate. Mortgage rates change every day, but recently they went from 4.85% to 5.75% and are now back down around 5.25%. We have had a few first time homebuyers who have only been concerned about "the bargain" price on their purchase. When we pointed out the variation of the mortgage 
rate and how it affected their purchasing power, they didn't get it at first. This got us to thinking ...
We're going to post a few tables with lots of numbers on them. Numbers can be intimidating, so for you non-numbers people - get ready!
Here are the constants: If you were to purchase a $400,000 home and put down 20%, you would be left with an 80% mortgage or a $320,000 mortgage. We have set the taxes and home owner's insurance at $550/month. Debt to income ratio is low and you have a high credit score (FICO score).
This table shows how the monthly mortgage payment and the Total Payments for the Life of the Loan change as the mortage rate increases.
|
Mortgage Amount |
Mortgage Rate |
Monthly Payment Amount |
# of Payments |
Total Payments for Life of the Loan |
| $320,000 | 4.50% | $2,171.39 | 360 | $781,700.40 |
| $320,000 | 4.75% | $2,219.27 | 360 | $798,937.20 |
| $320,000 | 5.00% | $2,267.83 | 360 | $816,418.80 |
| $320,000 | 5.25% | $2,317.05 | 360 | $834,138.00 |
| $320,000 | 5.50% | $2,366.92 | 360 | $852,091.20 |
| $320,000 | 5.75% | $2,417.43 | 360 | $870,274.80 |
| $320,000 | 6.00% | $2,468.56 | 360 | $888,681.60 |
Now, how much income do you need to purchase your $400,000 home? The mortage interest rate affects the amount of income you need to qualify for a mortgage. The next table will show you.
|
Mortgage Amount |
Mortgage Rate |
Annual Income to Purchase
$400,000 home |
| $320,000 | 4.50% | $78,960 |
| $320,000 | 4.75% | $80,701 |
| $320,000 | 5.00% | $82,467 |
| $320,000 | 5.25% | $84,256 |
| $320,000 | 5.50% | $86,070 |
| $320,000 | 5.75% | $87,907 |
| $320,000 | 6.00% | $89,766 |
Some people want a monthly mortgage payment at a set amount to fit their budget. This last table illustrates a set payment amount with varying mortgage rates and how your purchase power changes.
|
Monthly Mortgage Payment |
Mortgage Rate |
Your Purchase Power
|
| $2,267.83 | 4.50% | $423,791.15 |
| $2,267.82 | 4.75% | $411,635.86 |
| $2,267.82 | 5.00% | $400,000.19 |
| $2,267.82 | 5.25% | $388,857.86 |
| $2,267.82 | 5.50% | $378,184.06 |
| $2,267.82 | 5.75% | $367,955.34 |
| $2,267.82 | 6.00% | $358,149.55 |
We just threw out a lot of numbers and a lot of information to you. If you have any questions, please feel free to email us!
Bob & Richelle Ward, Realtors, ABR
Prudential Connecticut Realty
www.connecticuthomesforsale.com
Cell - (203) 470-9818
