Financing-home loans, House and Home, Real Estate

Lower price vs. lower interest rates

Interest Rates are at historic lows hovering around 4.25%. If you are still on the fence, it may be time to seriously consider the advantages of locking in this low of a rate for 30 years.  Additionally, the increase in your buying power is significant. If the rates increase just .5-1%, you will actually end up paying more per month than if you had bought at a slightly higher priced home with a lower rate.  This may also mean that you can afford more home than you would have been able to if the rates had been higher.  This is in the favor of sellers at the same time because they now have an increased buyer pool.

Here is an example:

Homes Decline 5% Homes Increase 5%
1% Rate Increase 1% Rate Increase
HOME PRICE $500,000.00 $475,000.00 $525,000.00
LOAN AMOUNT $482,500.00 $458,375.00 $506,625.00
INTEREST RATE 4.500% 5.500% 5.500%
MONTHLY PAYMENT $2,444.76 $2,602.60 $2,876.56
Savings – Monthly $157.85 $431.80
Savings – Life of Loan $56,826.00 $155,448.00

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s