What Interest Rates Really Mean for Your Buying Power

If you’ve been keeping an eye on the real estate market at all, you’ve probably noticed that interest rates are one of the hottest topics right now, and have been for quite a while. Many buyers are asking themselves: Should I wait until rates drop before I buy?

The truth is, rates do matter. But so does timing, home availability, and competition. Here’s what you should know.

Your monthly mortgage payment depends on three things: the purchase price, your down payment, and your interest rate. Even small changes in rates can significantly impact your payment. Here’s an example:

Home price: $500,000

Down payment: 10% ($50,000)

Loan: $450,000

At 6.5% interest, your monthly principal & interest is about $2,844.

At 5.5% interest, that drops to about $2,555 (almost $300 less each month).

That’s why so many buyers are waiting for rates to come down. But here’s the catch…

When you buy, you’re committing to the home, not the rate. Interest rates can be refinanced later if they drop. But if you hold off too long, you risk higher home prices and stiffer competition when rates do fall.

If rates drop by 1%, demand will surge. That $500,000 home today could easily become $550,000+ in a competitive market. Suddenly, even with the lower rate, your payment might end up being the same, or higher, than if you bought today. And worse, you could lose out on the home you truly wanted.

So, buying now means you lock in the home you love at today’s price. If rates improve, you can refinance later. If prices rise, you’ll be glad you didn’t wait. Let’s connect and run the numbers for your specific situation.