Today, we're going to piggy-back off my last post about interest rates going up to show you the correlation that it has with housing affordability.

It's not exactly breaking news for me to tell you that when interest rates go up your monthly payments go up as well. However, let me just show an example of the difference in home affordability had you bought a home just a couple of months ago when interest rates were at 3.5% vs. the 4% that are currently showing this hour.

I'll once again use our friends at bankrate.com to explain this example. If you were in the market to buy a $500,000 home (let's assume you put 20%/$100,000 down) just a few months ago when rates were at 3.5%, the monthly mortgage cost on a 30-year fixed rate mortgage (not including taxes and insurance) would have been $1796. Fast forward to this hour where interest rates are roughly 4.0% and that same $400,000 mortgage now has monthly payments of $1910.

But here's what really stands out to me, for the monthly payment of $1910 that you will now be paying on a 30-year fixed rate mortgage if you take the loan out this hour, just a few months ago when rates were 3.5% you could've gotten a loan for $425,000 for the same monthly payments of $1910. In other words you could've qualified for a house worth $25,000 more for the same monthly payment! Or another way to view it is that you could have put $25,000 worth of your own improvements/customization into the home for the same price!

With interest rates only going up from here, get the most bang for your buck and make that move you've been pondering ASAP

Next time, we'll talk about renting vs. buying.