Buy Your Dream Home Before Rates Increase
Mortgage interest rates are very low today, when compared to the past 40 years. At one of the highest points, in 1981, interest rates on home loans skyrocketed to 17.5%, resulting in a monthly payment of $5865 on a $400,000 loan.
Although the Fed has been slashing fed fund rates, the sad fact is that mortgage rates are tied to the bond market, which is driven by inflation. Economists are now saying inflation is going to increase, which means higher mortgage rates in the future. They are already starting to increase; so home buyers should buy now and lock in those low rates before they go higher.
Some people expect home prices to go down another 10%. Here is an example of what may happen with a typical Southern California home purchase if the mortgage rates increase by 1% and home prices decrease 10% over the next year.
|
Today |
Typical Home |
Cost in 12 Months $450,000 |
|
$400,000 |
Loan Amount |
$360,000 |
|
6% |
Interest Rate |
7% |
|
$2398 |
Monthly |
$2395 |
|
If prices go down by 10%, and interest rates increase 1%, the monthly payments are nearly identical. Why continue to live in a house or apartment that is not your "Dream Home" for another year? And remember, a good portion of your mortgage payments are tax deductible, so the sooner you buy, the less you will owe Uncle Sam when tax time comes around in 2009. |
The bottom line is, if you find a home that you want to live in for at least five years, then buy it now. Don't wait for prices and interest rates to go back up!
|
Are you ready to buy your first home, move up to a better home or buy an investment property? |
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Thinking of selling your Whittier Home? Go to The Home Sale Site.
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