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Can Higher Mortgage Interest Rates Lower Your Monthly Payments? The answer is YES!

Do you currently own a home? If yes, are you locked into a home with a low interest rate and don't want to move because you're concerned about being stuck with a higher rate? If yes, do you currently have a car payment, credit card bills, and/or personal loans?


If you answered yes to all of the above, what if I told you that taking a higher interest rate on your current home or buying a new home could help you financially? While this may sound crazy, in most cases, it could be the wiser choice. And here's why.


These stats emphasize how many Americans are sitting on a pile of debt. At the same time, some of these homeowners are in very positive equity positions. So, how can their equity work for them?


Example: Conventional loan, 720 credit and putting 20% down. (Could work for any loan)

  • $649.9K purchase price (median List price in Forsyth County, GA)

  • $324,950 (50% equity or remaining balance of loan)

  • 3% interest rate, average taxes, and insurance


Given you have a 3% interest rate on your home, your mortgage payment would be $3,059. However, you may also have $1,500-2,000 in debt per month that you are obligated to pay (for example, a car payment, credit cards, or personal loans).


According to Money.com, “Research from financial services company Northwestern Mutual found that excluding mortgages, the average personal debt per individual currently sits at $21,800."


This equates to $1,816.67 of monthly debt obligations outside of your mortgage payment.

If look at your total monthly debt profile, it would equal $4,875.67.


If you were to sell your home, collect the $324,950 in equity you have saved up, and pay off all your debts, you'd be left with $303,150 in cash.


You could buy another house for $750,000 ($100,000 more than your previous home) and put down the $303,150 you had left over from the sale of your home. And even with a 7% interest rate, your monthly payment would only be $3,973 with taxes and insurance.


Therefore, your total monthly debt obligation would go down almost $1,000 a month. Now you have a bigger house with a larger interest rate BUT spending LESS money.


If you are looking to downsize or move laterally in sales price (e.g., move to a different state, area, or school district), you could save even more a month.


Pro-tip:

If you took that $1,000 you are saving a month and put it towards the principal balance of your new loan, you could pay off your house in 20 years or less. This would drastically decrease your interest over the life of the loan and get you to financial freedom sooner.


Summary:

Don’t fear higher rates! They are not a death sentence or permanent. I can help you improve your cash-flow and get the house you want. I love serving people with their financial needs. Let's look at your debt profile and see how we can manage your money to work for you.



Christopher Moody of Supreme Lending
Christopher Moody

Christopher Moody Loan Officer NMLS #2235386 Cell: (678) 724-2375 Christopher.Moody@SupremeLending.com ChristopherMoody.SupremeLendinglo.com 1000 Mansell Exchange West, #310

Alpharetta, GA 30022


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