New interest rates drastically change loan payments

ATLANTA - Interest rates just last month jumped a touch more than seven percent in September. If you are home or car shopping, this can put a big dent in what you can now afford. 

Americans got used to historically low interest rates. Some people are locked into 30-year mortgages that are under three percent. That’s incredibly low. And, while the difference between three and seven percent might not seem like a huge spread, it is when you go to make a loan payment. 

LET'S DO THE MATH

If you're borrowing $300,000 on a 30-year fixed mortgage loan, at last year's rate of three percent, your mortgage payment, minus taxes and insurance, would be $1,265. 

Now let’s look at seven percent. That same loan is now $1,996 a month. This is a $731 difference. That changes how much home you can actually afford. 

Here are three things you can do to mitigate the costs. Wait to buy until things settle down. If you still need a car and must get a loan, then make sure you have the best credit. The better the credit score, the lower the rate you get. And finally, if you can swing it, get a shorter-term loan. Your rate will be lower. 

And for a little perspective, the highest rate was in 1981 at 19 percent. OUCH!