Monday, October 5, 2015

Mortgage interst rates and why you should buy or sell now.

If you own a home or are thinking of buying you may know that interest rates have remained very low. This is important for anyone that is considering buying or selling a home. You may not think that interest rates matter if you are selling a home but this is not the case. I will give you a couple reasons why you need to pay attention regardless of buying or selling. 


History Repeats itself-

Historically interest rates do not stay low forever (wouldn’t it be nice if they did though). Interest rates have been below 4% for most of 2015 and look to be holding steady through the end of the year. In 2013 and 2014 interest rates spent a majority of the year over 4%. Go back to 2011 and interest rates spent a majority of the year just below 5%. The interest rates are not likely to change dramatically unless we have another housing bubble. While they may not change dramatically the difference between 3.75% and 4.75% will make a dramatic difference on your payment. 

If you're paying 4.75% interest on a $200,000 loan for 30 years you will pay roughly $133,000 in interest over the life of the loan. If you take that same $200,000 loan and drop the interest rate to 3.75% you will pay $176,000 in interest over the life of the loan. So that 1% that doesn't seem like such a big deal will save you roughly $43,000. This is not including the principal amount that you will be paying, factor that in and your $200,000 house cost you either $333,000 or $376,000. Now I don't know about you but I don't care to pay almost as much in interest as I do for the house itself. 

Time is of the essence-

So if you are considering buying or selling now is the time to do it. I don't know what interest rates will do in the coming months or next year but I do know they are as low as they are likely to get. This means that the only place for them to go is up. This affects sellers as well as buyers. For most people selling their home they will turn around and purchase another home. That combined with the fact that you are likely to get top dollar for your home in most parts of the country make it a great time to sell. This may mean more competition when you go to purchase but it also means you get to take advantage of the lowest possible interest rates. The more interest rates go up the less enticing it is for new buyers to enter the market which means your home values may drop. 

One last thought-

To sum it up, nobody knows what the future hold but history has a way of repeating itself. So whether you are looking to upsize, downsize or just get into a different area you have to ask yourself "will their be a better time than now"? So it is up to you, roll the dice and see where the interest rates land when you're ready to move or take the sure thing and move now. 

No comments:

Post a Comment