The Expert Podcast

…So what will it mean if and when mortgage rates hit 10%. Well first of all before we get to that and how to calculate your payment, look at the historical chart of mortgages If you go back. from the late night early 1970s. This chart starts at 1972. And the rate at 10% is this line right here. So rates were eight nine 10% for a good part of 30 some odd years until we get into the early two thousands So roughly 30 years. now they go below 8%. So for the last let's say 50 years half the time rates were at or about 10% and half the time It wasn't. Keep in mind that this period of time here. from you know the early eighties until the mid to late nineties, it was a period of time of…high inflation unemployment. Does that sound familiar? Those are times like we're facing now So this is the reason why the rates may go up near double digits Right now they're roughly at 7%. the fed just and now. another, three basis points or 0.7 five. interest rate, increase that will bump the rates up even a little higher So what's that going to do for payments It'll be very easy to calculate mortgage payments Once rates go up that high let's take a look. And here's your mortgage calculator. If you put in a loan amount of $390,000, it gives you a monthly payment of $3,400 So roughly once you're at 10%, you can calculate your payment by just taking. the amount of your financing and chopping off two zeros. Right? So from 390,000 to 3,400, it's a little bit less than that but by the time you figure in taxes insurance, you're going to be more than that anyway So, you know roughly 1%. of your amount is what you end up having for mortgage payment, which makes sense because 10% mortgage. over the course of a year over 12 months. Averages out to be that amount So it will be very easy to calculate your payment. So that way you're looking at a $500,000 house your payment will be 5,000. If you're looking at a, $650,000 house your payment would be 6,500 and so on. I can remember back in the eighties. Instantly being able to figure out mortgage payment by just chopping off two zeros off the amount you're financing. So a two 60 house would be 2,600. This is going to help really. Guide the economics of purchasing a home and comparing it to rent. by putting. The payment in perspective. Of what it does compare to a rent because it landlord or a property owner needs to get a certain return on their investment. And that return is going to be also figured in a percentage. So if you have a $500,000 house how much do you need to make in order to have that be a viable investment? Once you pay your interest your taxes insurance maintenance upkeep, vacancy rate, right? So a 10% mortgage rate. is going to have an effect on both the price and also rental rates. And it may be the opposite of what you think Sometimes people think that a higher interest rate will reduce home values. We'll keep in mind in the seventies and eighties, when interest rates went up. Sometimes 15 16% housing prices didn't go down there Wasn't really a housing crash until the late eighties And it was a small blip. It popped right back up in the nineties. So mortgage rates may not have the same effect. On supply and demand is what you might think for other, commodities only because. People need to live in a house Other things you can use as discretionary purchases, we're real estate You need a roof over your head Everybody needs one and you have to pay something to get it.