Interest Rates Over Time

Some Highlights:

• With interest rates hovering at near historic lows, now is a great time to look back at where they’ve been, and how much they’ve changed over time.
• According to Freddie Mac, mortgage interest rates are currently hovering near a five-decade low.
• The impact your interest rate has on your monthly mortgage payment is significant. An increase of just $20 dollars in your monthly payment can add up to $240 per year or $7,200 over the life of your loan. Maybe it’s time to lock in now while rates are still low.

NOTE:  These numbers are national, and in some states and cities you may find even lower interest rates. This an incredible time to buy a home with someone else's money and use yours to get higher rates with investments. If you're buying and using your Veterans Mortgage Benefits current rates as of this writing are from 3.125 for a 30-year loan or 3.41% APR. The 15-year fixed VA loan rate is 2.990% or 3.529% APR.

Looking at the VA loans it's easy to see that the 30-year loan is your best choice from a safety perspective. Obviously, it will cost more in interest but there is safety in knowing that your rate will remain the same until you sell or you home is paid off on your terms,

Have cash and want don't want a mortgage - It's your choice of course but you do have other choices. Use the bank's money while you invest yours. Let's use an example to see how this might work.

If the home purchase was a $200,000 VA 30 year Loan

Terms: 0 down $1,376 = monthly Principle and Interest

$100,000 in savings.

THEORY: The home purchased is $200,000 dollar 30 year VA loan with zero down making the monthly payment for principal and interest $1,376.00

The national average for millennial's savings is over $100,000. Taking this money and investing, as an example the Vanguard Wellington Fund (VWELX) is reported to have a Historic Risk that is Below Average with Higher than Average Above Returns. The average return over the last 10 years was 9.90%

Another example is the First Trust Value Line Dividend Index Fund (FVD) that has a Historic Return that is High with a historic low-risk record. The average return over the last 10 years was 13.17%

That $100,000 dollar investment with a 10% annualized gain would equal $1,744,940.00 in savings, and that's without additional investment dollars or dividend reinvestment into the fund. Do both and your final number could be higher.

This could one reason to consider using a bank loan for the purchase of your home and your money to invest.

This, of course, is using past performance, and this could change going forward, however, it is something to consider for building a retirement nest egg.