Interest rates are at an all time low - what are you waiting for?
I am a numbers guy. I love to play with numbers and build spreadsheets and analyze until my eyes hurt - that's just who I am. I also love demonstrating to interested buyers and sellers how just by crunching a few numbers you can gain a great deal of insight into your financial situation in regards to home ownership. Today’s analysis is all about interest rates and the HUGE impact this has on wealth building through home ownership. I cannot stress how important I think this is. It is amazing to me what a difference just a point or two in your interest rate can make on not only your monthly payment but also on how quickly your principal increases and how much you pay in interest on the loan. I realize that most buyers are more interested in finding the perfect home and tend to focus more on the total monthly payment than the interest rate. But make sure you are paying attention to what the interest rate is doing to your monthly payment: the lower the interest rate, the lower the monthly payment and the more home you can afford. Take a look at the first chart and you can see the significant difference in monthly payment between 3.5% (current rate) and 7.5% (possible future rate). That’s almost a $500/mo difference! That’s $6000. more a year! I don’t have a crystal ball so I can’t tell you exactly when interest rates are going to go up, but I do know that just a few years ago we didn’t think twice about a 6.5% interest rate – that was the norm. Borrowing money is SUPER CHEAP right now and that means BIG savings in the short term AND the long term for qualified buyers. If you’re sitting on the fence waiting for the market to stabilize (ours has) or prices to keep dropping (they’re not) then I encourage you to hop off that fence and BUY NOW!
The following numbers are based on a loan amount of $200,000 on a 30 year fixed rate mortgage.
|
Initial First Payment |
3.50% |
6.00% |
7.50% |
| Principal & Interest Payment | $898 | $1,199 | $1,398 |
| Payment #1 – Principal | $315 | $199 | $148 |
| Payment #1 – Interest | $583 | $1,000 | $1,250 |
|
After 3 Years – 36 Payments |
3.50% |
6.00% |
7.50% |
| Balance of Loan | $188,071 | $192,168 | $194,029 |
| Total Principal Equity Gained | $11,929 | $7,832 | $5,972 |
| Total Interest Paid | $20,402 | $35,336 | $44,372 |
| Total of Payments | $32,331 | $43,168 | $50,343 |
|
After 5 Years – 60 Payments |
3.50% |
6.00% |
7.50% |
| Balance of Loan | $179,394 | $186,109 | $189,235 |
| Total Principal Equity Gained | $20,606 | $13,891 | $10,765 |
| Total Interest Paid | $33,280 | $58,055 | $73,141 |
| Total of Payments | $53,885 | $71,946 | $83,906 |
|
After 10 Years – 120 Payments |
3.50% |
6.00% |
7.50% |
| Balance of Loan | $154,854 | $167,371 | $173,590 |
| Total Principal Equity Gained | $45,146 | $32,629 | $26,410 |
| Total Interest Paid | $62,625 | $111,263 | $141,402 |
| Total of Payments | $107,771 | $143,892 | $167,812 |
Can you believe the difference a few points make? If you want to crunch your own numbers – use our mortgage calculator below. If you would rather me do it for you then give me a call/text or send me an email - 318-564-5295 or chris@chrishayesteam.com.
Do you need to buy or sell a home? If you ARE considering buying or selling a home in Shreveport or Bossier in the near future, would you please keep us in mind? You can reach us directly at 318-207-SOLD (7653) Thanks!
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