10 states with the highest mortgage rates


If you’re looking to buy a home in the near future, you’ve come to the right time for it, with interest rates still close to historic lows. However, they are not uniformly low across the country. Some states have relatively high average rates. Even if you live in these states, there is little cause for concern.

For context, mortgage rates for 30-year loans hit a nearly three-year high of 4.32% in December, and were recently around 4.27%. The Fed has started raising interest rates, and some experts suggest mortgage rates could exceed 6% by 2020.

Image source: Getty Images.

States with high interest rates (ish) (and States with low rates)

So which states offer the worst interest rates these days? Well, here are the 10 states with the highest average rates for a 30-year fixed-rate mortgage, according to data from Bankrate.com (as of the second week of February):

Average interest rate for a 30-year fixed rate mortgage

States)

4.13%

South Dakota

4.12%

Minnesota, Montana

4.11%

Delaware

4.10%

Vermont

4.09%

Alaska, North Dakota

4.08%

Iowa, Rhode Island, South Carolina

Source: Bankrate.com.

If you’re curious, here are the states offering the best interest rates:

Average interest rate for a 30-year fixed rate mortgage

States)

3.94%

Nebraska

3.96%

California

3.97%

Washington

3.98%

Alabama, Colorado, Kansas, Louisiana, New Jersey, New Mexico, New York, Oklahoma, Tennessee

Source: Bankrate.com.

Rising interest rates can be costly for homebuyers

What difference does a high rate really make? Well, check out the table below, reflecting the monthly payments for various interest rates for a 30-year, $ 200,000 fixed rate mortgage. I’m including the lowest recent rate – 3.94%, from Nebraska – and the highest, 4.13% from South Dakota. As the rates seem to be increasing, I am also including even higher rates.

Interest rate

Monthly payment

Annual cost

Cost over 30 years

3.94%

$ 948

$ 11,376

$ 341,280

4.13%

$ 970

$ 11,640

$ 349,200

4.40%

$ 1,002

$ 12,024

$ 360,720

4.75%

$ 1,043

$ 12,516

$ 375,480

5.25%

$ 1,104

$ 13,248

$ 397,440

6.00%

$ 1,199

$ 14,388

$ 431,640

Source: Bankrate.com, plus author’s calculations.

You can see that an interest rate of 4.13% won’t cost you an arm and a leg more than a rate of 3.94%, but it is a difference of a few thousand dollars over 30 years. It is much more informative to note what happens when the rates are higher, like 5% or 6% – remembering that historically, a mortgage interest rate of 6% is not that expensive. If current rates of around 4% rise to 6%, it can cost a typical borrower close to $ 100,000 or more over the life of their loan. It’s a big deal.

Higher rates mean less home

Higher interest rates also mean higher monthly payments, which could limit you to a cheaper (and perhaps less pleasant) home. If you can only trade monthly payments of $ 1,000, for example, the table below shows you how much you can borrow at different rates:

Interest rate

Home Prices

Mortgage at 80% of the price of the house

4.40%

$ 250,000

$ 200,000

4.75%

$ 240,000

$ 192,000

5.50%

$ 220,000

$ 176,000

6.00%

$ 210,000

$ 168,000

7.00%

$ 188,000

$ 150,000

8.00%

$ 170,000

$ 136,000

Source: Bankrate.com calculator.

You’re unlikely to be offered an 8% mortgage interest rate these days, but there have been years when rates were in the double digits – so 8% is not unthinkable. Look at how much this limits your purchasing power: the difference between a 4.4% interest rate and an 8% interest rate reduces the amount of home you can buy by about 32% – roughly. a third.

mortgage application on the desk, stamped

Image source: Getty Images.

Good news for home buyers

Fortunately, right now, and probably over the next couple of years, interest rates will remain historically low, allowing you to buy more homes than you might otherwise be able to. Even if you are in a state with relatively high interest rates, you don’t necessarily have to settle for the average local rate. Even in South Dakota, for example, a few online purchases have yielded rates as low as 3.924% from some lenders.

You can aim for lower interest rates by making sure that your credit score is as high as possible because high scores get lower interest rates from lenders. You can receive free copies of your credit reports once a year with each of the major credit reporting agencies – do this and correct any errors in them. If your score is legitimately low, consider waiting a bit before buying a house, so you can increase your score. Some ways to improve your credit score are to pay your bills on time and pay off a large chunk of your debt in order to lower your debt-to-available credit ratio. Lenders like to see you owe only about 10-30% of the sum of all your credit limits because it suggests that you have your debt under control and can afford to take on more debt through the mortgage than you. search.

Two other useful tips:

  • Figure out how many homes you can afford. It can be tempting to think big, but it can leave you with little leeway in the event that you or your spouse lose your job or your household faces major unforeseen expenses. Try to spend, say, no more than 25% of your income on your mortgage – and if you can keep it at 20% or less, you’ll free up more money for retirement savings, education savings, or more. other needs.
  • Once you decide you’re ready to make an offer as soon as you see a home you want, get pre-approved for a mortgage. It can make you a more competitive buyer.

Whether you live in a state where mortgage interest rates are relatively high or relatively low, be aware that you have some control over the rates offered to you. Make smart moves now and you might be able to spend tens or hundreds of thousands of dollars less – and maybe even buy your dream home.


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