The True Cost of a House

By
Real Estate Sales Representative with Long Realty Company

An interesting thing happened recently. For the first time since April, the interest rate for a 30 year fixed mortgage increased two weeks in a row. It didn’t increase much (.05%) but it was news because it had been so long since rates have ticked up. It will be interesting to see what the Fed reports today. We are not announcing that rates are headed higher. It is  too early to make that argument. However, the increase did make us look at the bargain rates are today. Home values have fallen to October 2003 levels as measured by the Case Shiller 20 City Index. You can buy a home today for the same PRICE you would have prior to the housing bubble. That’s amazing! The more amazing part is that it would COST you much less. You can purchase a home with a mortgage at a much lower rate than you would have in 2003. We did some research and found out that the mortgage rate at that time was 5.95%. Today rates are at 4.5%. We calculated what that would mean to a buyer’s monthly mortgage payment. How much would you save? Let’s assume for the sake of this example that you purchased a home and borrowed $200,000 via a mortgage. In 2003, your monthly mortgage payment (principle and interest) would have been $1,192.68. If you borrowed the same $200,000 today your monthly payment would be $1,013.37. Same house, same price but the COST is $179.31 less a month. That’s a savings of over $2,000 a year! Over the life of a 30 year mortgage, you would save over $64,000. Bottom Line If you are considering the purchase of a home but believe that waiting is the prudent thing to do because of price may continue to soften, make sure you keep an eye on interest rates. We have a tendency to look at just the PRICE of the house instead of the COST. The cost is actually more important.

From Steve Harney

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