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Why is a low interest rate a big deal, anyway?

By
Real Estate Agent with Century 21 Garner Properties

Why is a low interest rate a big deal, anyway?

Why are agents making such a commotion? I mean, it's not that great, is it?

 

Think again.

I'm going to give you some calculations from mortgagecalculator.com. I don't think most people realize just how much interest they pay in a mortgage scenario over the long haul, and why it takes so many years to build equity in a home.

Here's the scenario:

$150,000 mortgage

We'll assume 0% down payment through the USDA Rural Housing loan.

First calculation - 4.5% interest (similar to right now).

Second calculation - 6.5% interest (similar to rates just a few years ago).

Finally, we'll use the default tax and PMI rates.

.....

....

..

.

Ready?

At our current rates, you'll pay approximately $329,860.07 total for the $150,000 borrowed - that's $116,110.07 in interest alone!

At our OLD rates, you'll pay approximately $397,566.73 total for the $150,000 borrowed - that's $182,254.23 in interest, a whopping $66,144.16 more than now, not to mention $188.07 a MONTH higher payment!

Do you really want to waste all that money? Wouldn't you love an extra $188 a month? What about the fact that the average home price is down 11% in the last 5 years (Data from NKYMLS comparing average sold price in August 2006 ($155,000) to average sold price in August 2011 ($138,000) for a downward adjustment of 11%)? You can get more home for your money, a lower monthly payment, and save literally thousands upon thousands of dollars in interest. Why not call a Realtor (R) today?

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 Thanks for reading!

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Realtor (R), Sales Agent
Century 21 Garner Properties
2855 Madison Pike, Independence, KY 41051
(859) 363-9900
amanda.howard@century21.com

All information and pictures copyright of Amanda Howard unless otherwise disclosed. If you are interested in using any of the information for any purposes, please contact me to request permission. Information provided here is not warranted. This communication is provided to you for informational purposes only and should not be relied upon by you. Century 21 Garner Properties is not a mortgage lender and so you should contact the entity providing mortgage product(s) identified directly to learn more about its mortgage products and your eligibility for such products.

David Shamansky
US Mortgages - David Shamansky - Highlands Ranch, CO
Creative, Aggressive & 560 FICO - OK, Colorado Mtg

Nice way to break it down. So many people dont look at the entire benefit and they are truly amazing both in the short and in the long term

Sep 25, 2011 05:11 AM
Jen Giraud
American Home Shield - Dallas, TX

Great post Amanda, thanks for sharing! It always amazes me how much even a 1/2 % point can change the total amount paid. Buyers today must take advantage of the ridiculously low rates!

Sep 25, 2011 05:17 AM
Amanda Howard
Century 21 Garner Properties - Independence, KY
NorthernKentuckyHomes.com 859-363-9900

US Mortgages - Thanks! I know that I definitely didn't understand it until I became an agent and had to be tested over it.

Jen - That's exactly why it's so important to educate everyone! :-)

Sep 25, 2011 05:28 AM
Dora Griffin
D A Griffin Financial.LLC - Fort Thomas, KY
NMLS 6380

Hi Amanda, I just came across this post. When you put it that way, those are some pretty interesting numbers. I love to look at those when working with clients - give them all the information. I find the biggest problem about interest rates is when shoppers are all consumed with them. One of the first things I tell them is that most lenders have the same rate, so relax. It is not about the rate, it is about the costs and service too.

 

Two points is huge. Normally you'll see someone quoted 1/8 point difference and that is when you look at all the other factors like closing costs. Glad to see your post.

Feb 03, 2012 09:18 AM