Why Interest Rate Can Be The Better Benefit Than a Tax Credit

Real Estate Agent with Trademark Realty Group of Palm Coast

mortgage interest ratesThe national average interest rate on a 30-year fixed mortgage is an astonshing 4.29%.  Many buyers were obviously motivated by the tax credits last year and unfortunately the record-low interest rates get overshadowed.  Are these rates a better benefit to make the decision to buy now if you are considering purchasing a home?  Well let's do the math and you'll see that the truth is that these rates are the better benefit.

Let's take a $100,000 loan at 30 years fixed today at 4.50%.

  • Payment would be $506.69 (principal and interest)
  • Total interest over the life of the loan would be $82,406.71 or $2,746.89 per year

That same loan of $100,000 at 30 years fixed just 1% higher at 5.50% would be:

  • Payment of $567.79 (principal and interest) or $733.20 more per year
  • Total interest over the life of the loan would be $104,404.04 or $3,480.13 per year

The difference in the cost of the two loans year over year would be $4,213.33 combining the additional payment amount and interest.  Over the life of the loan the savings in interest is an whopping $21,997.33!  So are these interest rates a better benefit to buyers today?  Absolutely.

Start your Palm Coast or Flagler County, FL home search today at PalmCoastHomeShow.com or contact me so we can get your custom plan today.

Posted by

Kathleen West, Realtor
Trademark Realty Group of Palm Coast

416 South Central Ave Flagler Beach, FL  32136 | Office: (386) 446-5930 
Email:  Kathleen@PalmCoastHomeShow.com

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Comments (3)

Ray Saenz
Exit Realty Laredo - Laredo, TX
Homes for Sale in Laredo, TX - Texas, Realtor

YOu have a double post here or over there, I prefer that you may delete this on that way you don't delete my other comment, take care :)

Sep 19, 2010 07:08 AM
Chris Olsen
Olsen Ziegler Realty - Cleveland, OH
Broker Owner Cleveland Ohio Real Estate

Hi Kathleen -- This is a very astute observation and is worth pointing out and educating buyers.  I sure hope loan officers communicate this information.  In our market, with good credit, one can get a 30 year fixed with 0 points at 4.25%, that's incredible. Even a 20 year fixed is at 4.375% and the savings can be HUGE over the life of the loan.

Great post! :)

Sep 24, 2010 10:04 AM
Jeff R. Geoghan
Coldwell Banker Residential Brokerage - Lancaster, PA
REALTOR, Marketing Manager

Great point, Kathleen.

My folks live in PC - I was curious if any 'Rainers served their area.  I'll be following you!

Oct 07, 2010 05:33 PM