Mortgage Interest Rates Hit 7-Year High. Here’s What That Means

If you’re eager to buy a new home, now may not be the time to make the biggest purchase of your life.

That’s because the average interest rate has spiked to 4.61%, according to The Wall Street Journal. That’s up from 3.99% in January and the highest average since 2011.

Of course, a higher interest rate could translate to paying a few hundred dollars extra every month and thousands more added to the total cost of your home over the 30-year span of your mortgage.

For example, if you bought a $200,000 home back in January at the 3.99% interest rate, your monthly payment would be $954. If you bought the same house today at 4.61% interest, your monthly payment would jump to $1,026.

That $72 may sound insignificant if you’ve got the flexible income to cover it each month. But over the life of your 30-year mortgage, the 4.61% interest rate will mean paying $25,920 more for the same house.

Should You Buy That New House Now or Stay Put?

Whether you’re a first-time buyer or looking to move from your starter house to a bigger home, you’re going to have to do some pretty important math before you take the leap.

One of our Penny Hoarding freelance writers, Steve Gillman, has already shown how a few quick calculations can make easy work of the rent vs. own debate. In fact, Gillman and his wife saved more than $5,000 a year by renting a small home instead of buying at the top of the market back in 2006.

Gillman even put together a checklist to calculate the costs of a new home to help you decide if you should buy or keep renting.

According to Gillman — he’s been a homeowner six times over as of 2016, so we trust his judgment — you should be able to say yes to all these points.

• You have enough money for a down payment.

• You have enough money for closing and moving costs.

• You know what it really costs to have a home.

• You can handle the big surprises that come with owning a home.

• You are ready for the time and work of caring for a home.

Check out Gillman’s story to learn even more if you still can’t decide if you should buy or stay put.

Desiree Stennett (@desi_stennett) is a staff writer at Codetic.