Wednesday, June 09, 2010
Interest Rates are a Primary Consideration…Now and Later When Purchasing a House
I prefer to think of it as the price of renting someones money, the cost of borrowing.
With a major purchase like a house or condo, the interest rate can make a big difference in the rent you pay for that money.
Suppose you found a house for sale in Viera, Florida (or wherever) with a $250,000 purchase price. You place 10% down and finance $200,000 for thirty years.
At a 5% interest rate, your monthly payment for 30 years is approximately $1,074 a month. [This does not include other costs like taxes, insurance, association fees, etc.]
Being a shrewd home buyer you decide to wait on the purchase. After all, prices have been dropping for a couple of years. After six months prices have stayed about the same.
But interest rates have risen a modest 1% to 6%.
At 6% interest, the same loan is $1,199 a month. This is only $125 a month ($1,500 a year, $45,000 over the course of 30 years).
Prices and/or interest rates may change. No one knows for sure. The bottom line is the interest rate greatly impacts your monthly payment as well as how much you may qualify to borrow.
Pay attention to prices but do not ignore the interest rates!
In Brevard County, Florida call Joe Harris to discuss mortgage options. I have found the folks at Regions Bank to be quite helpful as well!
Gary L. Waters, PLLC, Florida licensed real estate agent, Century 21 Baytree Realty, Rockledge, Florida