The Expert Podcast

• Many potential homebuyers worry whether future mortgage payments will be more affected by rising home prices or increasing mortgage interest rates.
• We explore which factor—home value or interest rate—has a bigger impact on your monthly mortgage payment before purchasing a house.
• Important note: This discussion focuses on the decision before buying, not changes after purchase with a fixed-rate mortgage (where payments remain stable).
• Example scenario: A $200,000 loan on a 30-year fixed mortgage at a 3.8% interest rate results in a monthly payment of about $932.
• Buying a modest $200,000 home can often be cheaper than renting, especially when you consider that mortgage payments contribute toward an appreciating asset, unlike rent.
• If the home price rises by 20% (to $240,000), the monthly mortgage payment increases by roughly $300.
• If the interest rate rises from 3.8% to about 5%, the monthly payment increases by about $100 to $150.
• This shows home price increases affect mortgage payments more significantly than moderate interest rate increases.
• Once you lock in a fixed mortgage rate and loan amount, your payment won’t change, unlike rent which can increase at your landlord’s discretion.
• Each 1% change in interest rate roughly equals a $22,000 to $23,000 change in home price impact on your monthly payment.
• Equity gained from home price appreciation is locked in as your purchase price remains fixed, even if market values rise.
• If interest rates go down after purchase, you can refinance to lower your payments, but you cannot reduce your home’s purchase price.
• Buying when interest rates are higher may actually be advantageous, as it can keep home prices lower and offer refinancing options later.
• If rates rise dramatically after purchase, your fixed payment stays the same, potentially saving you money compared to new buyers.
• Unlike rent, your mortgage payment is predictable and can be managed through refinancing, offering more control over housing costs.
• This episode clarifies the relationship between home prices and interest rates and helps buyers understand which factor matters more when deciding to buy.