The government tax credits for new home buyers have, for the most part, expired, but there is still a major incentive to buy right now--Interest rates haven't been this low since the early 1970s!
Anyone who has ever bought a home understands the difference that an interest rate can make for your monthly payment. Often times purchasers will pay from half-a-point to
two points (a point usually costs about 1% of the loan) to secure a lower rate. This decreases both their monthly payment, as well as the amount of money paid over the life of a loan.
If you can buy a house at a lower interest rate, the difference in what you pay each month results in real savings in your monthly mortgage payment.
For purposes of demonstrating this, I thought I would use the example of the townhouse I recently had listed in the City of Falls Church.
The list price was $675,000.
A standard 20% downpayment would result in a loan of $540,000
Taking in to account only principal and interest (not taxes and insurance) the following example will show you how recent reductions in interest rates can save you REAL money!
Sales Price: $675,000
Down-payment: $135,000
Loan amount: $540,000
Interest Rate: 4%
Payment: $2,578
If you go back to rates last winter (2008-09) when rates were closer to 5.5% the scenario looks like this:
Sales Price: $675,000
Down-payment: $135,000
Loan amount: $540,000
Interest Rate: 5.5%
Payment: $3,066
Taking this one step further to looking at an interest rate at around 7% the numbers look like this:
Sales Price: $675,000
Down-payment: $135,000
Loan amount: $540,000
Interest Rate: 5.5%
Payment: $3, 593
The difference between payments at an interest rate of 4% and 7% was almost $1,000 a month!!!!! As you can see, these exceptionally low interest rates can provide you with serious savings--and without having to itemize your taxes.
If you have been on the fence about buying a property, remember that these rates will not remain at historic lows indefinitely. Just because the government is not giving you a tax incentive, don't ignore the incentive of extremely low interest rates!
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