Should we calculate budget using higher rates?
First time home buyer and wondering if what we are doing is make sense:
So, I realize that interest rates are low, but, I'm wondering, what if in 5 years interest rates going up, would we still able to pay the mortgage?
That said, instead of calculating budget based on 1.5%, we are calculating based on 3.9% and see if we can still afford to buy a house.
The issue is, once we factor in all of our income, expenses, retirement contribution, house maintenance, etc., we have to increase our income by $10,000 more per year before we can afford to buy a house if we use 3.9%. If we calculate based on 1.5%, then our current income is enough.
That said, calculating the budget using a much higher rates make sense to me, but, not sure if I'm just being paranoid?