If you were eyeing a fairly priced condo at $400,000 and over a couple months it dropped 15% to $340,000, would you jump on it? If you were a serious buyer, you most likely would.
Well, that is happening with mortgage rates. Too often, buyers focus on just the list price and don't take it a step further to look at the monthly payment. Just a couple months ago, 30 year fixed rate mortgage were at 6.5%, which historically is still a good rate. Today, I got a couple rate sheets from some of my lenders quoting a 5% interest rate for a 30 year fixed loan. What contributed to the low rates? The announcement by the Federal Reserve on 11/25/08 to directly purchase $500 Billion in mortgage back securities.
So, let's look at some numbers.
| Loan Amount | |||
| Int Rate | $400,000 | $500,000 | $600,000 |
| 5.0% | $2,147 | $2,684 | $3,221 |
| 5.5% | $2,271 | $2,839 | $3,407 |
| 6.0% | $2,398 | $2,998 | $3,597 |
| 6.5% | $2,528 | $3,160 | $3,792 |
For a $400,000 loan at an interest rate of 6.5%, the monthly mortgage payment would be $2,528. Taking a 15% discount, the monthly payment drops to $2,149, almost equal to the payment at 5%.
That is a monthly saving of
$381
a yearly saving of
$4,572
and a total saving of
$137,154
over the 30 year loan term!
For a personal consultation to see if now is the right time for you to buy, contact me anytime.
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