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Let's talk interest rates real quick.

Do you know, when I bought my first house, I paid approx. 7% interest, and that was actually really good at that time? Now mind you, that was about 23 years ago, however; did you know that in the 80's people were paying up to 20% in interest? So what does interest really mean?

Let me paint you a picture.. kinda..

Think of it like a balancing table as interest goes down, the amount of money you can borrow goes up. Why? because you don't have to pay the bank back as much money to borrow their money for your home purchase. The opposite applies. As interest rates go up, it has to be counter acted by the amount of money you can borrow, because it will cost you more to borrow it. Equaling: The lesser the interest rate the bigger the home. The increase in interest rate will result in a smaller home. Two scenarios ending up with the same monthly payment, but with very different properties.

Often times when we make decisions on big purchases we think of the monthly payment and our budget, but not interest rates and what that actually means for you as a buyer and seller.

As a buyer a low interest rate is what we all want, and even with the increases lately, interest is still low, it's just not as low as it was a year ago, or even 4 months ago for that mater, but it's still not 7%, so there's a positive. : ) It's still a great time to buy.

For sellers as interest starts to climb it may be the perfect time to sell while buyer's are still ready to buy. If you've been thinking about downsizing now may be the time to really think about that while it would still make sense financially to do so. We still have a strong buyers market, but in due time all things have to balance out.

I think we'll start to see purchase made with more thought into them then what we've seen in the past couple years, but the market will still move, it always does.

For a better understanding of interest rates, a stronger knowledge of the market surrounding you and for your future investments. Talk to a Pivotal Real Estate agent, we'd be happy to lead the way.

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