Return of “Halley's Comet”!
All real estate professionals are saying now is the time to buy a home. “Top ten, top five, and top three reasons to buy a home now list” are popping up everywhere. But why are we being told to buy a home now. The ANSWER is the lowest mortgage interest rates in 50 YEARS.
I will use my childhood home as an example. My parents purchased this home in April 1980 their mortgage rate was 16.4% and purchase price was $36,000 with a down payment of $7,000 (20%). My parents’ monthly payment was $397.
A home today, priced at $250,000 with a 20% down payment and a mortgage rate at 4.36% the monthly payment would be $997. The price of a home in 2011 is 7 times more expensive than 1980; however, with current low mortgage rates the monthly payment is only 2.5 times more a month.
Let’s take the today priced home and add a few “What If’s”.
The home price stays the same at $250,000, with a 20% down payment but the mortgage rate goes up to 6.36% monthly payment is now $1246. Buy at lower rate monthly savings of $249.
Home price drops to $225,000, with a 20% down payment and the mortgage rate stays up at 6.36% monthly payment is now $1121. Buy at lower rate monthly savings of $124.
Both scenarios show lower mortgage rates equal lower monthly payments. Not to mention these monthly payments compare nicely to rentals in my region. No one has a crystal ball and can forecast the future. So we don’t know when the rates will go back up. I just don’t want anyone to miss this great opportunity. I feel like the low mortgage rates is the Return of “Halley's Comet”.
All monthly payments are the amount borrowed plus interest only.
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