Is now a good time to buy using a mortgage?
I am
sure that you have heard over the past few months that interest rates are
expected to rise as a result for the Fed’s anticipated rate hike. However, with the global economy’s multiple
crises, economic experts are expecting mortgage rates to stay the same, or to
drop even further.
The
Chicago Tribune reports that low mortgage rates will be something we can grow
used to. Most notably, the recent BREXIT
situation has caused major players in the US to rethink their position on the
state of our interest rates in the US due to an increasingly growing world
economy on a macro-level. For example,
Freddie Mac’s chief economist has stated that "the turbulence abroad
should continue to create demand for U.S. Treasuries and keep mortgage rates
near historic lows; thereby, allowing home sales to have their best year in a
decade, along with a boost in refinance activity."[1]
OK, so what does this mean for me?
Let’s
compare interest rates using the annual averages for 2007, 2011, 2015, and June
of 2016, assuming a 30-year fixed, $250,000 loan balance. Rates are derived from Freddie Mac’s compiled
data.[2]
Year
|
Average
Int. Rate
|
P&I
Payment
|
Savings
compared to 2007 rates, annualized
|
2007
|
6.37%
|
$1,864.75
|
-
|
2011
|
4.45%
|
$1,511.16
|
$4,243.08
|
2015
|
3.85%
|
$1,406.42
|
$5,499.96
|
Jun-16
|
3.57%
|
$1,358.88
|
$6,070.44
|
So
as you can see from this simplified chart, last month compared to the average
rates in 2007 would yield homebuyers a savings in $6,070.44 in interest, each
year! This means that homebuyers can
possibly qualify for homes that they wouldn’t have qualified for in 2007, or
perhaps it will allow homebuyers to take that extra money that they are not
spending on interest payments, and apply it to pay down debts or put it into
investments for further growth.
Conclusion
As
physics dictates, what goes up must come down (and in this case, the opposite-
what goes down, will eventually go up!), so it is a great idea to reconsider
your position. Now is a great time to
take advantage of the lower interest rates to buy your first home, or perhaps
even move up to a bigger home.
