Model house squeezed by vise grip

The biggest worry I have for clients I see everyday is the amount of debt and the size of mortgage they carry.  We have benefited from extraordinary low interest rates for several years now and this is about to change. Interest rates are raised with improving economy as a measure to control inflation.

If you carry a mortgage you will want to pay attention to this.  A 1% increase in interest rates translates into about  a 10% increase in mortgage payments  for a 25 year mortgage. Interest rates are likely to increase by 1% to 3% over the next few years.  If you carry a $300,000 mortgage for example, and rates go from 3% to 6% which is very possible over the next 2 years, your mortgage payment would increase by about $500 per month.  That will be a big deal for a lot of people.

So, my advice is simple.  Avoid taking more debt than you can afford at the projected higher rates.