Mortgage Rates on the Rise! But Not by That Much

Before Thursday's announcement by the Federal Reserve ("The Fed"), mortgage rates rose in anticipation. By .01 percent. Not one percent, not a tenth of a percent, but one one-hundredth of a percent. What does that mean for you? Using our very own 15- vs 30-year mortgage calculator, this is what we learned. 

If you were to borrow $200,000 at this week's average rates, here's what you would pay in interest:

30 year fixed rate

Last week's rate: 3.9%

Interest paid over the life of the loan: $139,602.40

This week's rate: 3.91%

Interest paid over the life of the loan: $140,012.80

Extra amount of interest paid over 30 years, at the higher rate: $410.40

Don't get us wrong. $410.40 is a lot of money. We wouldn't walk past it on the sidewalk, and we'd be awfully happy if you wrote us a check that big for our birthday. But if we found it over 30 years? Or you divided it over our next 30 birthdays? Not as exciting.

15 year fixed rate

Last week's rate: 3.1%

Interest paid over the life of the loan: $50,344

This week's rate: 3.11%

Interest paid over the life of the loan: $50,518.60

Extra amount of interest paid over 15 years, at the higher rate: $174.60

So, where can you really save? By getting a shorter term mortgage. If you get a 15-year mortgage instead of a 30-year mortgage, and your opening principal balance is $200,000, you could save $90,000 dollars. Nobody gets birthday checks that are that large. (Well, maybe a Kardashian, but not the rest of us.) And if the higher monthly payment isn't in your budget right now, don't beat yourself up for waiting a week or two to apply for a mortgage. You aren't losing as much as you might think.

Don't get us wrong. We believe in keeping an eye on the market, knowing your current interest rate if you already have a home loan, and knowing when might be a good time to refinance or buy a home. But if it's the right time for you to move, or to buy for the first time, then the interest rate doesn't change that. 

So, should you ignore the Fed completely? Absolutely not. Their decisions matter, and though they decided against raising the rates on Thursday, Fed chair Janet Yellen indicated that there likely would be a hike before the end of the year. The labor market is improving in the US, which is one indicator that rates will rise. And the economy matters. But in the end, when it comes to personal finance decisions, the only financial forecast that really counts is your own.

Your household economy should rule your financial decisions. After all, just because the economy in the US is improving doesn't mean you have enough money to go out to dinner tonight. And a .01 percent increase in average mortgage rates doesn't mean you don't have the money. So, what are we doing this weekend? Staying in and cooking, ordering pizza, or going out for a multi-course feast and a night on the town? Only your bank account knows for sure!