Attention Real Estate Pros and people buying homes right now….
The 10 Year Treasury broke 2%. This is one of the factors that drives mortgage rates. The average rate on a 30 yr mortgage in the US will be officially over 4% and you can expect these rates to continue to rise. Will this affect you on the commercial side of things?
I remember when I got into the business in 2004. Rates were on the way down and 6% was the going rate for people in most Conventional & FHA loans. The phone was blowing up (not mine, I just got in the business) for all who were in the business then. The refinance boom of that time was upon us…and many at that time had much higher rates and could remember rates more than double that for mortgage financing.
You can use the same calculations for your investment properties and figure out….Will the property I buy cash-flow at 6%-7%?
Let’s get real. 5% rates are still really good! This is where we are give or take
Here is the math…
$250,000.00 mortgage @ 5% rate is $1,342 per month
$250,000.00 mortgage @ 5.5% rate is $1,419 a difference of $77.00 per month
Lets go a little higher just for fun…
$250,000.00 mortgage @ 6% rate is $1499 per month…$157/month higher than 5%
$250,000.00 mortgage @ 7% rate is $1663 per month…$321/month higher than 5%
Now throw in the monthly taxes & insurance….Are you making money?
When I take a look at those numbers a few things come to mind.
- DSCR loans run off of the expenses & the income or rent coming in or projected
- Most lenders have a min ratio anywhere between 1 and 1.25 that they want minimum
- If you don’t have what it takes…get a partner that does
Moral of the story…things are changing. What will come of it? I don’t know and neither do most people…
What should you do if you are planning on buying? Don’t panic! Talk to your mortgage professional and really dig into the numbers on what YOU can do and get realistic with the numbers. There are many programs out there that will get you started in your journey. Please let me know if I can help in any way.
