If ever there was a time to appreciate the power of a low interest rate, this is it. But some of us relate more to dollars than to percentages, so let’s do the math.
According to www.FreddieMac.com On April 29, 2010, just before the tax credit expired, the interest rate on a 30 year fixed rate mortgage was 5.06%, a very good rate. Coupled with up to an $8,000 tax credit many people bought a new home. But the current interest rates make today an even better time to buy. I realize this sounds hard to believe, but let’s break it down and look at the big picture…
As of late August the interest rate was down to 4.42%. For a $400,000 home purchase, that translates to a monthly savings of $154 versus the same purchase for an April buyer. The bigger picture is that over the life of the loan the interest savings is $55,515!
There is even more to consider… What if you bought or refinanced your home 5 years ago and now have 25 years left on your loan? Assuming your home will appraise, you can refinance today and save a bundle. If you financed a $400,000 in 2005, when the average rate was 5.87%, you are paying about $2,365 per month in principal and interest. You could refinance your balance and reduce your principle and interest payment to about $1.857, saving $508 per month! Or you could keep your payments the same and shorten the length of the loan, saving tens of thousands in interest over the life of the loan.
There are people who need to buy and sell in every market, and today’s market is no exception. People typically purchase a home due to changes in their lives. Are you or anyone you know getting married, divorced, having children, emptying the nest, getting promoted, or changing jobs? If so, now is an excellent time to take advantage of this unprecedented opportunity, housing affordability is at record high levels. Do you know that in your lifetime there has likely never been a better time to buy or refinance? Are you sitting on the fence waiting to see if prices go down while the interest rates inch up? Don’t allow yourself to look back at this time with regret over a missed opportunity. The stars are aligned right now with good inventory, low prices and low interest rates. Today is the day to take full advantage of this good economic news and share it with those you know who stand to benefit!