Got Mortgage Rates?
If you watched TV news, you'd think banks have no money to lend. Ridiculous! I have officially concluded that television is our greatest enemy. I believe this whole-heartedly. I cannot tell you how much I am sick of hearing people on the news saying, "...the sky is falling...". Over and over again, it's a constant mantra. And that's just a comment I catch just when I'm flicking through channels. I don't actually watch much television and when I do, if I pass Fox, CNN, ABC, CBS, etc. - I find myself catching a news anchor saying how horrible things are.
Well let me tell you something...interest rates are hovering around 5% for a 30 year fixed mortgage. Of course, that's a rate for a prime buyer with fico scores over 630 and good income and low debts. But wait just a minute - 630 credit score? Last I checked, that wasn't all that stellar - but it can get you a good rate.
Now I must qualify that statement with this: The mortgage market is changing every month. My business associate, Tony Auffant of Continental Home Loans, is constantly updating me on the changes to the mortgage market.
Due to these changes, it can be amazing what is available one month and gone the next. Like a 5% interest rate! The following is an excerpt from an article I wrote in April about the effect of mortgage rates on your monthly interest paid:
If you buy a house for say $440,000 now and put 20% down, with a $350,000 mortgage now, at a fixed percentage rate of 6%, 30 year mortgage, the total amount of payments over the 30 years would be $755,431.84 with the total amount of interest paid being $405,431.84.
If you buy this same house say, 10 months from now (when the market prices "hit bottom") for $410,000 and put 20% down, with a $328,000, at a fixed percentage rate of 8%, 30 year mortgage, the total amount of payments over the 30 years would be....$866,426.55 with the total amount of interest paid being $538,426.5 5.
We're talking over $100,000 more in costs just to "save" 8 t o 10 percent now on a purchase price. It clearly doesn't add up. Even if you say you're not going to live their for 30 years and will most likely sell the home 5 to 7 years from now, the cost to you will be more if you wait and take the chance of interest rates being higher.
Now you can adjust those numbers but they remain the same. The difference between 5% and 6.5% means you're paying approximately 23% more in interest (the difference between 5% and 6.5% is not just 1.5% - it's a 23.077% difference).
So now I basically am saying to you, as a buyer, you're just simply nuts not to seriously consider buying real estate now. I have written in the past that interest rates would be higher now. And I can admit, I was wrong, but no one saw what happened in October to the entire financial market. Not even Warren Buffet himself saw that coming.
So I'm not going to say that interest rates will be higher 3 months from now. What I will say is that I know the following facts:
1. Interest rates for qualified buyers are incredible...right now.
2. Prices have dropped over 20%.
This may not be enough for you, as a buyer. To you I say - continue paying rent and see how much you increase your net worth over the next year and call me when you're ready to buy or sign up for a listingbook account now and browse the market like a champ. To the buyer who's shaking his head in curiousity and is saying, "I think it's time to buy"...
Call me 631-831-9048.
(c) Copyright 2008, http://www.tommcgiveron.com
By Thomas McGiveron, Licensed Salesperson
Tommcgiveron.com features articles on foreclosures and other items effecting the Long Island real estate market as well as a ton of useful resources for first-time homebuyers, homeowners, and much more.
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