What a week we had last week in the stock market, and with the S&P downgrade, this week is likely to be just as disconcerting since Moody’s just announced they are watching this Administration’s actions carefully as well. The full ramifications for us “average citizens” is yet to be determined, however, there is concern that interest rates might rise for mortgages, car loans and credit cards.
What difference can a mortgage rate rise mean to you?
The average interest rate for a 30-yr fixed loan in June 2011 was 4.5%. If that average increases only 1.4% (to 6.5% interest) that can equal a 25% increase to your payment amount or it can mean that you’ll have to shop for a lower priced home if maintaining a certain mortgage amount is critical to you being approved for the loan.
Homeowners, who have a home for sale, may want to consider lowering their price to get their home in contract now, so they can buy at the lower interest rates we have now. A price decrease on your current home may cost you less than the interest rate increase on your next home.
Impact of Mortgage Payment for 3 Home Prices @ two interest rates
| |
$200,000 |
$300,000 |
$400,000 |
| Loan @ 20% down |
$160,000 |
$240,000 |
$320,000 |
| 4.5% rate |
$811.20 |
$1,216.80 |
$1,516.80 |
| 6.5% rate |
$1,011.20 |
$1,516.80 |
$2,022.40 |
| Extra Paid/Yr |
$2,400 |
$3,600 |
$4,800 |
| Extra Paid/5 Yrs |
$12,000 |
$18,000 |
$24,000 |
Now’s a good time to buy
OK, you often hear that phrase from Realtors® and from the National Association of Realtors® TV ads. If you doubt it, take a look at this chart of the mortgage rates since 1972. Notice that the average rate for 1972-2010 was 8.92%. Think about how much more home you can purchase at today’s current rates vs how much you might have to drop down in price if rates were to return to the nearly 9% average rate. I’ve purchased homes in ’72, ’76, ’85, ’95, and ’97 so I know what a difference the higher rates can mean.
Click to enlarge
If you want to see if you can afford to buy now, call Pam Mahon, Home Mortgage Consultant with Real Living Mortgage at 614-273-6366. She’ll walk you through your options to tell you what price of home you can be approved to buy.
Other news you need …
As Washington tries to work us out of this mess, keep a watch on their discussions about cutting the mortgage interest deduction (often referred to as MID) that we currently can take on on Fed Tax Forms. Some politicians want it to be eliminated completely while others suggest elimination only on more expensive homes ($500,000 has been bantered about). “Washington-speak” may call that a “loophole”, but it’s a tax increase for us citizens. The National Association of Realtors® is working hard to fight this elimination because it removes even more money from people’s wallets.
Copyright © 2011. Elaine Reese, Real Living HER. Reproduction of any portion of this blog post or the images is prohibited by the Digital Millennium Copyright Act. If this post is being viewed on any site other than www.ReesesPiecesOfRealEstate.com then the material has been stolen without permission. Violators will be reported.
You would have to be living under a rock if you haven’t heard at least one Realtor® or mortgage broker say that it’s a good time to buy a home or refi your current mortgage. Like many others, I decided it was time to refi my home’s mortgage. My current loan is at 5-1/8%. My goal on a refi was 4% or lower to make it worthwhile to pay the closing costs. Here’s the process I went through.
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