How Low Interest Rates Affect Your Home Purchase in Northern Colorado

The convergence of low home prices, good inventory and low interest rates in the Northern Colorado real estate market may have you thinking about purchasing a new home. If so, a close look at what's been happening with interest rates may help you better assess your situation.

Interest rates are at historic low levels today. They have been moving steadily down for the last 5 years, but there may not be much room left for them to sink much lower. Yes, there are still numbers below where we're at right now, but when transaction costs are figured in, I suspect that we are getting close to a point below which money just wouldn't be available for mortgages. But the prevailing wisdom is that rates will remain at relatively low rates for a while.

Let's take a look at how the decrease in rates has benefitted the home buyer over the last several years.

We're going to look at the numbers for a mid-market home for Northern Colorado, priced at $250,000, which, over the last 5 years, hasn't changed much in value. And we'll look at a 30 year fixed rate mortgage, with different down payment options:

                                                                               Monthly Payment - Principal & Interest 
                     
                                  Rate          FHA Loan(3.5% Down)     10% Down Conventional      20% Down Conventional
October 2006           6.30                     $1493                                         $1393                                        $1238      
October 2007           6.42                     $1512                                         $1410                                        $1254      
October 2008           6.10                     $1462                                         $1363                                        $1212      
October 2009           4.94                     $1286                                         $1199                                        $1066      
October 2010           4.32                     $1197                                         $1116                                          $992      
October 2011           3.94                     $1143                                         $1066                                          $948

The same home that would have cost $1493 per month for principal and interest as an FHA loan in 2006 would cost only $1143 today, a monthly savings of $350 or 23% less. And at today's rates, that 2006 payment for a $250,000 home would now purchase a home priced at over $310,000.

So even with the recent problems affecting the housing market, there has been a real and significant improvement in the home buyer's purchasing power. Given the other positives in the local housing market right now, this might be the right time to make a move.

If you'd like to investigate where you could make that move to, take a look at Fort Collins CO Homes for Sale or Loveland CO Realty. And if you want to discuss your options and timing in more detail, please give us a call - Mary and I would be happy to talk to you.