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Reduced Price vs Changes in Interest Rate
Tuesday, February 23rd, 2010 at 11:45am. 1758 Views, 0 Comments.
Clients often ask me about the effects of price vs interest rates on payments when purchasing a Denver area home. Since there is widespread agreement in the lending industry that 2010 will bring increased interest rates I thought I would put a post together that demonstrates their effects.
I am going to use a loan value of $200,000 for this example and strictly look at principal and interest.
To take this just one step further.
I am going to use a loan value of $200,000 for this example and strictly look at principal and interest.
- Financed amount = $200,000
- Rate of interest = 5%
- Term of 30 Years
- Payment = $1073.64 per month
- Payment with 1/2% Rate increase = $1135.58
- Payment with 5% Price increase = $1127.33
- As you can see a ½% rate increase has about the same effect on payments as a 5% price increase.
To take this just one step further.
- Payment with 1% Rate increase =…