Yes, I know we just got through holiday spending, but if you didn’t break the budget, and are in the market to buy a home, you just might want to think about doing it NOW! Even the TV news anchors are talking positively about the market. Why? Because interest rates are really, really low as are home prices.
Even though the drop of 1½ percentage points doesn’t sound like much, it really does have quite an effect on the “Principal & Interest” portion of your mortgage payment. Just a few weeks ago, the interest rates were running at 6.5%-6.75%. Now they’re down around 5%. *
To show you how much a change in interest rates can affect your monthly payment, I’ll use a couple of my listings as examples.
This home with a finished lower level, loft, large kitchen, deck and nice fenced yard is priced at only $194,900. That’s only $102/sq ft. Let’s assume you make a 5% down payment ($9,745) for a 30-yr fixed rate mortgage. At an interest rate of 6.5%, the principle/interest would be $1170. However, at a 5% interest rate, the payment would only be $994 … a savings of $176 per month … or $2,112 per year for every year you stay in the home!
If you decide to wait, hoping that rates do make it down to 4.5%, there’s a risk home prices may increase (because demand will increase). The breakeven point for the same $994 house payment at 4.5% would be a home price of $206,500. That would require an extra $580 out-of-pocket for the down payment. So you’ll need to decide which meets your short-term and long-term financial needs the most … a lower priced home … a lower down payment … or a lower interest rate.
This custom built 4BR Worthington home with a 1st floor owner’s suite and 3,500 sq ft is on a cul-de-sac. It’s priced below the market ($94/sq ft) for this size home at only $329,900. For this home a 5% down payment would be $16,495. At an interest rate of 6.5%, the principle/interest would be $1980. However, at a 5% interest rate, the payment would only be $1682 … a savings of $298 per month … or $3,576 per year that you live in the home!
The breakeven numbers for this home at 4.5%, 30-yr fixed are a $349,500 home price and an extra $980 in down payment for that higher priced home.
If you’re interested in buying one of these two homes, here’s a couple loan officers I recommend contacting to see what interest rate you can qualify for and what price of home you can afford.
- Tony Butler, Equitable Mortgage, 614-764-5071
- June Zepp, Real Living Mortgage, 614-825-8806
One more point to consider regarding buying now at a 5% interest rate, since that is a very, very low rate, if you take out a fixed rate loan you “might” be able to avoid the cost to refinance in future years. Sitting on a mortgage rate of 5% is likely to carry you through for the time you own the home versus someone else who purchased a home at a rate in the 6’s. Those folks may decide to refinance and there are costs associated with refinancing. Under this scenario, buying now is more a cost-avoidance rather than a realized cost savings, if you know what I mean.
If you’re interested in either one of these homes, give me a call at 614-825-8860. Of if you need mortgage information, call either Tony or June to answer those specific questions.
* The actual rate you qualify for will depend on your credit score, credit history, down payment, etc. The monthly payments mentioned above do NOT include financing any closing costs. Talk to your favorite lender for the rate you might obtain.
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A look back in order to look to the future
January 4, 2009 · No Comments
I participate in a real estate blogging network called Active Rain, along with around 130,000 other Realtors®. I used to do more blogging there, but once I started this blog, I don’t write there very often. Mainly, now I just stay in touch with certain bloggers who I enjoy reading as we share tips, thoughts and ideas.
Over the holiday weekend, I wrote an article for that audience of people in the industry who are naturally, also bloggers. My article was a call-to-action for us as Realtors®, but also as U.S. citizens, regarding our current economy and the future of the Nation. Naturally, everyone has an opinion on those topics, so there are good comments after the article as well. Click here if you’d like to read the article and comments.
Hopefully, it will at least stimulate your thoughts whether you agree with the concept or not.
→ No CommentsCategories: Commentary · Internet · Realtors® · Technology
Tagged: central ohio real estate market, economy, the power of blogging