Interest rates are at an all time low. It’s all over the news and social media. What does it truly mean for you?
Interest rates are not the only thing to consider when getting a mortgage loan. I’m going to write about some very basic information that is only for conventional loans. To get the full picture and truly know your options, please speak with a mortgage specialist. Specifically, a mortgage broker.
First let’s talk about the purchase. It is my firm belief that you should not rush your decision to make a purchase. Based on market conditions, you may rush to purchase a specific property. However, the basic decision regarding if it’s the right time to buy is important and deserving of your time. You have factors other than financial to consider.
Assuming a conventional loan in which you’ve qualified for the current rates (3.8%), the principle and interest per $100,000 of loan is $466. For comparison, at 6% the principle and interest per $100,000 is $600. Depending on your price range, this could be a substantial difference in your monthly payment. Keep in mind, over the last 20 years 6% has been considered a good rate more often than not.
Based on your credit scores and other criteria, your rate and down payment will vary. Also, there are closing costs to be considered. Don’t forget you’ll have taxes and insurance to pay as well. This is meant to be a very basic equation. Again, please consult a mortgage broker.
What about refinancing? That can get even more complicated. I’ll stick with the scenario of a conventional loan. Your looking at a minimum of $3000 to refinance a $100,000 residence. That number goes up based on too many factors to consider here. To refinance $250,000 on a $300k+ property, conventional, you’re looking at anywhere from $4500-$10,000 in closing cost based on lender fees, legal fees and escrows for your taxes and insurance.
Regarding refinancing, this is what I would consider: If I’m having no trouble making the current payment, I would consider refinancing at the lower rate, keeping the same payment but knocking years off the loan. Your mortgage broker can estimate the cost to refinance and you can determine if it cost more or less than it will save you. Again, your mortgage broker may determine that you qualify for other types of non-conventional loans that reduce costs as well.
My point is that just because interest rates are really low it doesn’t mean you should change your current course. It does mean you should discuss the FACTS with a mortgage broker. Look at the numbers yourself and ask lots of questions. The fees can be sneaky but they can also be legitimate and less than you would pay over years of a higher interest rate.
Get the facts. Make an educated decision. Of course, if you decide to buy, call your REALTOR!
leighyork 