Mortgage rates are rising. Here’s how to adjust your housing budget

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Homebuyers are feeling the squeeze of rising mortgage rates. On top of that, prices remain high. That may lead many to rethink their .

“As mortgage rates go up, it raises the cost of buying a home with a mortgage,” explained Danielle Hale, chief economist at Realtor.com.

“For many homebuyers, higher mortgage rates equal a higher monthly cost, especially for those taking out a large mortgage.”

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The rate for a 30-year fixed mortgage is now 5.65%, according to Mortgage News Daily, up from 3.29% at the start of the year. The median listing price hit a record $450,000 in June, according to Realtor.com.

At the current rate, the cost of a 30-year fixed mortgage on a $450,000 home means $2,078 in monthly payments, if you put down 20%, according to Realtor.com’s calculator. That doesn’t include property tax, home insurance, homeowner association fees or mortgage insurance, since the down payment was 20%. If you put down less, you are typically subject to private mortgage insurance, or PMI.

At a 3.29% rate, the cost for such an arrangement is $1,575 a month.

The good news is that supply constraints are easing as more homes are coming on to the market.

“We are seeing a shift from w. we were six months ago,” said Glenn Brunker, president of Ally Home.

“I wouldn’t say we are in a buyer’s market, but definitely the market w. the seller controls the experience, the transaction [and] the price, we are seeing some softening in that.”

Here’s what to look at when adjusting your .

Consider your overall

Look into available interest rates

Consider your mortgage terms

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T. are different mortgage products on the market and different ways to approach calculating your monthly bill.

One way to lower your monthly payments is to make a larger down payment so that you aren’t borrowing as much on the cost of the property. That may work for someone who is selling a home and has a large amount of equity available, but this choice is likely a difficult one for first-time buyers, Hale said.

Similarly, shelling out money ahead of time by buying what are termed “mortgage points” can lower your interest rate. Each point costs 1% of the mortgage amount and typically lowers the rate by 0.25%, according to Bankrate. This approach may or may not work for your financial situation.

“It may be a very high cost to bring the mortgage rate down just a little bit, or sometimes you get a big reduction without paying many points,” Hale said. “Most lenders will give you the best execution rate.”

On the flipside, you can lower the final cost of the home if you get a 15-year fixed mortgage instead of a 30-year fixed loan, Brunker said. Right now, a 15-year fixed loan has a 4.95% interest rate, according to Mortgage Daily News.

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