"Take Advantage Of Low Mortgage Interest Rates"

Real Estate Agent with RE/MAX Rancho Bernardo

If you are in the market for a home, boy is your timing great!

Right now there are tons of houses to choose from; prices are low; and many sellers are desperate to cut a deal.

But, perhaps even better for the prospective home buyer are the current interest rates.

Lenders are now offering 30-year fixed-rate mortgages at 5.1%. This is the lowest that interest rates have been since the 1960s!

And the Federal Government is trying to push rates even lower - perhaps as low as 4.5% -- in the next few months in an effort to nudge buyers who are on the fence to buy now and stimulate the housing market and the economy.

Some buyers are waiting in hope that house prices will drop further. I believe this is a mistake because the current interest rates will not be available for long.

Which is better for the buyer - a slightly lower purchase price later or extremely low interest rates now? Let's take an example.

Assume you could buy a home now for $500,000 with a mortgage at 5%. Or you could wait a year and maybe the house price would drop 10% (which I doubt) but interest rates would return to 7%, which is pretty much normal.

If you bought now and put down $100,000 (20%), you would have a monthly payment of $2,147.29 based upon a $400,000 loan at 5%.

If you bought in a year, you would have to put $90,000 down (20% of $450,000) but your monthly payments would be $2,395.09, based upon a $360,000 loan at 7%.

So, because of higher interest rates, your payments would be about $3,000 higher per year. Over 30 years, you would pay $91,000 more during the life of the loan.

When you consider that prices may not decline any further but interest rates will almost certainly climb, if I were a buyer, I would buy soon.

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