At Home With Christie – Interest Rates Are Going Up, But Your Payment Isn’t

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Christie Mahany
Christie Mahany

Interest rates are going up, but your payment isn’t.

“Interest rates are going up! Interest rates are going up!” Well….yeah. They kind of have to, don’t they? I’ve been telling my buyers that they really can only go so low….after all, nobody’s going to pay you to borrow money. But the good news is your payment isn’t likely going up.

Wait…what?! How does that math work?? Well, here’s the deal. If you already own your house then you’re locked into your interest rate (unless you have an ARM, but that’s another topic). If you’re buying a house in the near future you’re going to get a pre-approval from a bank, which essentially is just a budget, which will tell you how much you can spend per month with a correlating maximum purchase price. Providing that your financial situation stays the same, that monthly payment will stay the same. What will change is the price and quality of homes that you’re looking at.

Let’s explain this better use pumping gas as an example. After all, if you’re like me you’re doing that at least once a week so it should be familiar. In this example the price of gas is going to serve as the interest rate – it goes up, it goes down, and it’s all over town. The $30 in my hand is going to serve as my budget. Just like a pre-approval, that $30 is all I have to work with and there’s no swiping my credit card here. Each gallon of gas represents the amenities and features and square footage and upgrades that will be in my new house (my tank).

How many gallons of gas I can get with that $30 is directly tied to the price of gas. So, when the price of gas (interest rate) is low? I can fill my tank with more gallons (more house) for the same $30 (monthly payment). When price goes up, I don’t get as much gas. I just going to have to settle for less house than I would have earlier. I’ve heard people say “you’re going to spend more for the same house”, but in all reality, I’m not going to spend more, I’m just going to have to work with what I’ve got.

P.S. That’s why pre-approvals are so important – know that budget and the “price of gas” and you will know how far you can get with it – before you start looking at houses.

At home, Christie

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About Christie Mahany:

Christie Mahaney
Christie Mahaney

On any given day I’m a full time real estate agent, momma and chief wrangler of two kids and two dogs, married to a guy who essentially hunts and fishes for a living, and happy residing on the outskirts of Erie, PA. Sometimes I fool myself into thinking I have superpowers, except my cape is usually in the laundry…I hope. It’s all in a day’s work.

Editor note: You can follow Christie on social media at the following link:
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