Tuesday, July 7, 2020 / by Vanessa Saunders
By Vanessa Saunders, MBA, MIMC , Broker Owner, Global Property Systems Real Estate.
I wrote a blog yesterday about how mortgage loan interest rates set a new all time low record last week. The story we told was about how such attractive financing, paired with the low number of homes for sale in the Hudson Valley and a predicted up-tick in home prices this season should be great news for sellers. We forgot one thing.
Low mortgage rates are also great news for buyers. Even first time buyers. Here's why.
Home prices may be heading for a rise right now, but buyers can offset paying a little extra for a home by the astonishing amount they'll save by financing now.
What many people often forget when they decide to buy is that the price they agree to pay for a house at contract isn't how much they'll actually pay. Leaving aside taxes and other ancillary home ownership expenses, what they actually pay is the amount they'll borrow for the home AND the interest they'll pay on their mortgage. The amount can be quite a shock to anyone not familiar with an amortization calculator.
Here's an example. Let's say you're borrowing $300,000 to finance that home of your dreams. A 30 year fixed rate mortgage at last week's Freddie Mac average of 3.07% will cost you $159,429 in interest if and when you pay it off by June, 2050. Compare that to a mortgage at say... 5.34%, which was the top average rate last year. That mortgage would run you $302,414 in interest paid for the life of the loan. By buying at today's rate, you could end up NOT spending $142,994 had you financed at 5.34%
Told you you'd be shocked. And it makes the few thousand extra dollars a buyer may pay now look like small change in the larger picture.
Here's the question we ask buyers who balk at today's prices and ignore today's mortgage rates. Would you like to have $142 grand in your back pocket in thirty years?
CONTACT US to help you find the answers to any questions you may have about buying or selling a home in the Hudson Valley. Looking for financing? Contact Barry Goldenberg, Luxury Mortgage to find home financing that's right for you. Direct Line: (516) 393-4470. Mobile Line: (516) 398-9511