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The difference 1% makes

By
Real Estate Agent with REMAX Signature - Chicago

Although it may seem small when first mentioned, one percent can result in a big change. This came to mind recently when speaking with a buyer about mortgage rates. She was concerned that home prices had not bottomed out yet and wanted to make sure she waited until the right time.

The question of when is the bottom of market or when is the best time to purchase are hard to answer. The following example about mortgage rates really provides something to think about. Specifically, buyers do not ultimately live with their purchase price. The only time purchase price comes into question again is when the buyer sells their property.

I am not advocating that buyers be unconcerned with their purchase price. I am saying that mortgage rates play a much more important role in housing affordability and what qualifies as a great deal.

Take these three mortgage rate examples. All are based on a loan amount of $250,000 and a 30 year conventional mortgage.

$250,000 @ 5% = $1,342/month payment $250,000 @ 6% = $1,498/month payment $250,000 @ 7% = $1,663/month payment


Consider this payment over five or ten years and you really have some significant savings. If you add in the possibility of inflation in that time, you are really ahead. With the way the US government is printing money and taking on debt, the buyer is going to be paying back that mortgage with dollars that are only worth 80% what they are worth today several years from now.

Show All Comments Sort:
Pat Champion
John Roberts Realty - Eustis, FL
Call the "CHAMPION" for all your real estate needs

Great post buyer's don't usually think about the rates affecting their purchase until they see it on paper with all the number's showing their savings over time.

Dec 05, 2010 05:21 AM
Henry Velasquez
Cobalt Realty Group - Ventura, CA

Great comparasion, great reminder of !%, we know rates wont always be low forever

Dec 05, 2010 05:27 AM
Michael Michalak
REMAX Signature - Chicago - Chicago, IL

I think so many folks don't know when to pull the trigger.   This example shows them the risks of waiting.

Dec 05, 2010 05:29 AM
Tamara Schuster
Naperville Glen Ellyn Lisle Plainfield Wheaton Illinois - Naperville, IL
Realtor Broker - Naperville

Love the number details. Thanks for the post.

Mar 23, 2011 07:39 AM