Buying a home? Here's what rising mortgage rates will cost you
Mortgage rates are jumping, delivering a one-two punch to potential buyers already dealing with home prices that have risen sharply over the past few years.
"There's no doubt that, with rising interest rates, homebuyers are going to be increasingly stretched to afford homes that have become extremely expensive in the past few years," said Aaron Terrazas, senior economist with real estate website Zillow, which just released an analysis of the impact of rising mortgage rates.
"Monthly mortgage payments for the typical home are 15.4 percent higher than they were in August 2017. The median home value is 6.5 percent higher over the past year. For someone buying the median U.S. home, their monthly mortgage payments are $118 higher, or $1,416 each year," said the report.
Zillow noted that higher mortgage payments "reflect the combination of increased home values as well as the higher interest rates for buyers."
Indeed, mortgage giant Freddie Mac on Friday reported that the rate for 30-year fixed mortgages has hit a seven-year high -- and experts expect home-loan rates to continue rising. Interest rates tend to increase in response to inflation, which is picking up steam for the first time in decades.
Although no one currently predicts the sort of rapid wage and price acceleration that occurred during the 1970s and early 1980s, U.S. economic growth is now high enough to make inflation a mounting concern.
Terrazas expects that rates on 30-year fixed-rate mortgages, which jumped 0.19 percentage points Friday to 4.9 percent, will creep up another tenth of a percentage point before year-end and will rise to 6 percent by the end of 2019. Although these rates are still relatively modest in historic terms, 6 percent would be a near doubling of the low rates buyers enjoyed in the wake of the Great Recession.
Notably, even a modest rise in interest rates has a big impact on homebuyers, particularly in high-cost markets, adding hundred of dollars onto the monthly cost of a mortgage.
For potential buyers, the best advice for dealing with this rising-rate trend is to work on the two things in your control -- your credit rating and your down payment. Consumers with a top credit score and with at least 20 percent of the purchase price as a down payment get the lowest rates available, said Terrazas. Those with poor credit and less-substantial down payments are likely to borrow at considerably higher rates, which could push affordability out of range.
On the bright side, the ultra-hot housing market of the last few years appears to have cooled somewhat, which means fewer homes are receiving multiple offers and less need to bid above the asking price to get the house you want.
How much might rising rates affect you? Here's a look at median home prices in all 50 states, per the experts at Zillow, and the monthly payment for the average mortgage based on today's 4.9 percent rate versus the predicted 6 percent. This shows how much payments would change each month and over the life of the loan. (These figures assume that buyers made a 20 percent downpayment and financed just 80 percent of the total home price.)
Here are the state-by-state findings, listed alphabetically:
Alabama
Median home price: $126,600
Mortgage: $101,280
Cost @ 4.9 percent: $537.52
Cost @ 6 percent: $607.22
Net monthly increase: $69.70
Total lifetime increase: $25,092
Alaska
Median home price: $307,600
Mortgage: $246,080
Cost @ 4.9 percent: $1,306.01
Cost @ 6 percent: $1,475.37
Net monthly increase: $169.36
Total lifetime increase: $60,969.60
Arizona
Median home price: $240,300
Mortgage: $192,240.00
Cost @ 4.9 percent: $1,020.27
Cost @ 6 percent: $1,152.58
Net monthly increase: $132.31
Total lifetime increase: $47,631.60
Arkansas
Median home price: $121,800
Mortgage: $97,440
Cost @ 4.9 percent: $517.14
Cost @ 6 percent: $584.20
Net monthly increase: $67.06
Total lifetime increase: $24,141.60
California
Median home price: $539,400
Mortgage: $431,520
Cost @ 4.9 percent: $2,290.14
Cost @ 6 percent: $2,587.18
Net monthly increase: $297.04
Total lifetime increase: $106,934.40
Colorado
Median home price: $364,600
Mortgage: 291,680
Cost @ 4.9 percent: $1,548.02
Cost @ 6 percent: $1,748.77
Net monthly increase: $200.75
Total lifetime increase: $72,270
Connecticut
Median home price: $238,600
Mortgage: $190,880
Cost @ 4.9%: $1,013.05
Cost @ 6 percent: $1,144.42
Net monthly increase: $131.37
Total lifetime increase: $47,293.20
Delaware
Median home price: $231,200
Mortgage: $184,960
Cost @ 4.9 percent: $981.63
Cost @ 6 percent: 1,108.93
Net monthly increase: $127.30
Total lifetime increase: $45,828
District of Columbia
Median home price: $567,400
Mortgage: $453,920
Cost @ 4.9 percent: $2,409.07
Cost @ 6 percent: $2,721.48
Net monthly increase: $312.41
Total lifetime increase: $112,467.60
Florida
Median home price: $224,600
Mortgage: $179,680
Cost @ 4.9 percent: $953.61
Cost @ 6 percent: $1,077.27
Net monthly increase: $123.66
Total lifetime increase: $44,517.60
Georgia
Median home price: $175,500
Mortgage: $140,400
Cost @ 4.9 percent: $745.14
Cost @ 6 percent: $841.77
Net monthly increase: $96.63
Total lifetime increase: $34,786.80
Hawaii
Median home price: $615,000
Mortgage: $492,000
Cost @ 4.9 percent: $2,611.18
Cost @ 6 percent: $2,949.79
Net monthly increase: $338.61
Total lifetime increase: $121,899.60
Idaho
Median home price: $232,400
Mortgage: $185,920
Cost @ 4.9 percent: $986.73
Cost @ 6 percent: $1,114.68
Net monthly increase: $127.95
Total lifetime increase: $46,062
Illinois
Median home price: $174,300
Mortgage: $139,440
Cost @ 4.9 percent: $740.05
Cost @ 6 percent: $836.01
Net monthly increase: $95.96
Total lifetime increase: $34,545.60
Indiana
Median home price: $133,700
Mortgage: $106,960
Cost @ 4.9%: $567.67
Cost @ 6 percent: $641.28
Net monthly increase: $73.61
Total lifetime increase: $26,499.60
Iowa
Median home price: $138,500
Mortgage: $110,800
Cost @ 4.9 percent: $588.05
Cost @ 6 percent: $664.30
Net monthly increase: $76.25
Total lifetime increase: $27,450
Kansas
Median home price: $134,200
Mortgage: $107,360
Cost @ 4.9 percent: $569.79
Cost @ 6 percent: $643.68
Net monthly increase: $73.89
Total lifetime increase: $26,600.40
Kentucky
Median home price: $138,800
Mortgage: $111,040
Cost @ 4.9 percent: $589.32
Cost @ 6 percent: $665.74
Net monthly increase: $76.42
Total lifetime increase: $27,511.20
Louisiana
Median home price: $145,300
Mortgage: $116,240
Cost @ 4.9 percent: $616.92
Cost @ 6 percent: $696.92
Net monthly increase: $80.00
Total lifetime increase: $28,800
Maine
Median home price: $222,000
Mortgage: $177,600
Cost @ 4.9 percent: $942.57
Cost @ 6 percent: $1,064.80
Net monthly increase: $122.23
Total lifetime increase: $44,002.80
Maryland
Median home price: $282,500
Mortgage: $226,000
Cost @ 4.9 percent: $1,199.44
Cost @ 6 percent: $1,354.98
Net monthly increase: $155.54
Total lifetime increase: $55,994.40
Massachusetts
Median home price: $395,300
Mortgage: $316,240
Cost @ 4.9 percent: $1,678.37
Cost @ 6 percent: $$1,896.02
Net monthly increase: $217.65
Total lifetime increase: $78,354
Michigan
Median home price: $143,100
Mortgage: $114,480
Cost @ 4.9 percent: $607.58
Cost @ 6 percent: $686.37
Net monthly increase: $78.79
Total lifetime increase: $28,364.40
Minnesota
Median home price: $225,100
Mortgage: $180,080
Cost @ 4.9 percent: $955.73
Cost @ 6 percent: $1,079.67
Net monthly increase: $123.94
Total lifetime increase: $44,618.40
Mississippi
Median home price: $122,500
Mortgage: $98,000
Cost @ 4.9 percent: $520.11
Cost @ 6 percent: $587.56
Net monthly increase: $67.45
Total lifetime increase: $24,282
Missouri
Median home price: $153,000
Mortgage: $122,400
Cost @ 4.9 percent: $649.61
Cost @ 6 percent: $733.85
Net monthly increase: $84.24
Total lifetime increase: $30,326.40
Montana
Median home price: $225,100
Mortgage: $180,080
Cost @ 4.9 percent: $955.73
Cost @ 6 percent: $1,079.67
Net monthly increase: $123.94
Total lifetime increase: $44,618.40
Nebraska
Median home price: $157,800
Mortgage: $126,240
Cost @ 4.9 percent: $669.99
Cost @ 6 percent: $756.87
Net monthly increase: $86.88
Total lifetime increase: $31,276.80
Nevada
Median home price: $275,200
Mortgage: $220,160
Cost @ 4.9 percent: $1,168.45
Cost @ 6 percent: $1,319.97
Net monthly increase: $151.52
Total lifetime increase: $54,547.20
New Hampshire
Median home price: $264,600
Mortgage: $211,680
Cost @ 4.9 percent: $1,123.44
Cost @ 6 percent: $1,269.13
Net monthly increase: $145.69
Total lifetime increase: $52,448.40
New Jersey
Median home price: $316,500
Mortgage: $253,200
Cost @ 4.9 percent: $1,343.80
Cost @ 6 percent: $1,518.06
Net monthly increase: $174.26
Total lifetime increase: $62,733.60
New Mexico
Median home price: $186,600
Mortgage: $149,280
Cost @ 4.9 percent: $792.27
Cost @ 6 percent: $895.01
Net monthly increase: $102.74
Total lifetime increase: $36,986.40
New York
Median home price: $280,000
Mortgage: $224,000
Cost @ 4.9 percent: $1,188.83
Cost @ 6 percent: $1,342.99
Net monthly increase: $154.16
Total lifetime increase: $55,497.60
North Carolina
Median home price: $173,500
Mortgage: $138,800
Cost @ 4.9 percent: $736.65
Cost @ 6 percent: $832.18
Net monthly increase: $95.53
Total lifetime increase: $34,390.80
North Dakota
Median home price: $202,100
Mortgage: $161,800
Cost @ 4.9 percent: $858.08
Cost @ 6 percent: $970.07
Net monthly increase: $111.99
Total lifetime increase: $40,316.40
Ohio
Median home price: $132,900
Mortgage: $106,320
Cost @ 4.9 percent: $564.27
Cost @ 6 percent: $637.44
Net monthly increase: $73.17
Total lifetime increase: $26,341.20
Oklahoma
Median home price: $119,300
Mortgage: $95,400
Cost @ 4.9 percent: $506.53
Cost @ 6 percent: $571.97
Net monthly increase: $65.44
Total lifetime increase: $23,558.40
Oregon
Median home price: $334,100
Mortgage: $267,280
Cost at 4.9 percent: $1,418.53
Cost @ 6 percent: $1,602.48
Net monthly increase: $183.95
Total lifetime increase: $66,222
Pennsylvania
Median home price: $168,500
Mortgage: $134,800
Cost @ 4.9 percent: $715.42
Cost @ 6 percent: $808.19
Net monthly increase: $92.77
Total lifetime increase: $33,397.20
Rhode Island
Median home price: $273,500
Mortgage: $218,800
Cost @ 4.9 percent: $1,161.23
Cost @ 6 percent: $1,311.83
Net monthly increase: $150.60
Total lifetime increase: $54,216
South Carolina
Median home price: $158,800
Mortgage: $127,040
Cost @ 4.9 percent: $674.24
Cost @ 6 percent: $761.67
Net monthly increase: $87.43
Total lifetime increase: $31,474.80
South Dakota
Median home price: $181,800
Mortgage: $145,440
Cost @ 4.9 percent: $771.89
Cost @ 6 percent: $871.99
Net monthly increase: $100.10
Total lifetime increase: $36,036
Tennessee
Median home price: $158,400
Mortgage: $126,720
Cost @ 4.9 percent: $672.54
Cost @ 6 percent: $759.75
Net monthly increase: $87.21
Total lifetime increase: $31,395.60
Texas
Median home price: $185,800
Mortgage: $148,640
Cost @ 4.9 percent: $788.87
Cost @ 6 percent: $891.17
Net monthly increase: $102.30
Total lifetime increase: $36,828
Utah
Median home price: $310,800
Mortgage: $248,640
Cost @ 4.9 percent: $1,319.60
Cost @ 6 percent: $1,490.72
Net monthly increase: $171.12
Total lifetime increase: $61,603.20
Vermont
Median home price: $195,400
Mortgage: $156,320
Cost @ 4.9 percent: $829.63
Cost @ 6 percent: $937.22
Net monthly increase: $107.59
Total lifetime increase: $38,732.40
Virginia
Median home price: $250,700
Mortgage: $200,560
Cost @ 4.9 percent: $1,064.43
Cost @ 6 percent: $1,202.46
Net monthly increase: $138.03
Total lifetime increase: $49,690.80
Washington
Median home price: $370,700
Mortgage: $296,560
Cost @ 4.9 percent: $1,573.92
Cost @ 6 percent: $1778.03
Net monthly increase: $204.11
Total lifetime increase: $73,479.60
West Virginia
Median home price: $95,300
Mortgage: $76,240
Cost @ 4.9 percent: $404.63
Cost @ 6 percent: $457.10
Net monthly increase: $52.47
Total lifetime increase: $18,889.20
Wisconsin
Median home price: $177,700
Mortgage: $142,160
Cost @ 4.9 percent: $754.48
Cost @ 6 percent: $852.32
Net monthly increase: $97.84
Total lifetime increase: $35,222.40
Wyoming
Median home price: $219,800
Mortgage: $175,840
Cost @ 4.9 percent: $933.23
Cost @ 6 percent: $1,054.25
Net monthly increase: $121.02
Total lifetime increase: $45,567.20