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Whether you are thinking of buying or already own a home the
current historically low interest rates may help you save thousands
of dollars.
Rates in the last week have averaged the lowest point since
records were first kept over 30 years ago. Refinancing today
may help you save hundreds of dollars in monthly interest payments
but even more important are the long term savings.
Rates are low right now because the financial crisis in Europe
is driving the appetite for U.S. bonds which in turn raises
the price and lowers the yield (interest) payment. And since
mortgage rates roughly track the 10 Year Treasury Bond you can
see where rates are headed and why. Rates are the lowest they've
been-period.
If you think about the past 30 year trend of interest rates,
which have averaged around 9%, it's easy to guesstimate that
the odds are good rates will be higher in the future rather
than lower. What does that mean to you? If you are considering
a purchase it means that there are two ways to look at it: if
you buy a home at today's rates either your monthly payment
will be substantially lower or you can buy a considerably larger
home for the same amount of money. In fact a payment on a $1,000,000
home ($800,000 loan) would be around $4,234 per month as opposed
to $6,437 at the average historic 9% rate. But that doesn't
even begin to tell the whole story.
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Not everyone stays in their home for 30 years but this offers
up a substantial savings in interest payments. Most people aren't
aware of the long term costs of homeownership so you'll be interested
to note that at today's rate your total interest payments over
30 years would total $725,000 and at the historical 9% rate
it would be as high as $1,517,000-over double the interest payment
for the same home. What could you do with an extra $793,000?
Perhaps rates will never be as high as they were back in the
late 70's and early 80's but rates have still averaged 6.7%
over the last 15 years during a time of historically low rates.
Now combine this with the recent decrease in home values and
it's hard to argue that waiting to buy a home will significantly
benefit you.
Thanks for reading this far down the page. If you'd like to
offer up any suggestions for our web site or newsletter, or
just reply to say hi, we can be reached at dmorgan@morganhomes.com.
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