If you were eyeing a fairly priced condo at $400,000 and over a couple months it dropped 15% to $340,000, would you jump on it? If you were a serious buyer, you most likely would.
Well, that is happening with mortgage rates. Too often, buyers focus on just the list price and don't take it a step further to look at the monthly payment. Just a couple months ago, 30 year fixed rate mortgage were at 6.5%, which historically is still a good rate. Today, I got a couple rate sheets from some of my lenders quoting a 5% interest rate for a 30 year fixed loan. What contributed to the low rates? The announcement by the Federal Reserve on 11/25/08 to directly purchase $500 Billion in mortgage back securities.
So, let's look at some numbers.
| Loan Amount | |||
| Int Rate | $400,000 | $500,000 | $600,000 |
| 5.0% | $2,147 | $2,684 | $3,221 |
| 5.5% | $2,271 | $2,839 | $3,407 |
| 6.0% | $2,398 | $2,998 | $3,597 |
| 6.5% | $2,528 | $3,160 | $3,792 |
For a $400,000 loan at an interest rate of 6.5%, the monthly mortgage payment would be $2,528. Taking a 15% discount, the monthly payment drops to $2,149, almost equal to the payment at 5%.
That is a monthly saving of
a yearly saving of
and a total saving of
over the 30 year loan term!
For a personal consultation to see if now is the right time for you to buy, contact me anytime.
Rick Bosl is an associate broker in Arlington, VA specializing in the condo market. He is the agent other agents go to with their condo questions.
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