LOAN INTEREST RATES

Wow have you seen the interest rates today? I can not remember them ever being lower and hopefully they will stay that way for a little while. I have seen the rates go this low and then pop back up again the same day or within a day or two.

Today, America First Credit Union's website states their 30 year mortgage rate is 4.875%. Bankrate.com shows that Wells Fargo is offering 4.75%. Unbelievable.

To give you an idea of what this means to a buyer, if you were to borrow $200,000 at 6.0% (which is where we were hovering for quite a while), your principal and interest payment would be $1,199.10. If you were to borrow that same $200,000 at 4.875%, your principal and interest payment would be $1,058.42. That's a savings of $140.68 per month.

Now if you take that $140.68 per month and assume that you are not going to pay off your mortgage early, then you would spend an extra $50,644.80 for the same house!

Now do you see how valuable the lower interest rate is? But besides that, if you are in the market to purchase a home, you would be able to buy more home for the same payment. So you would be able to raise your purchase price and possibly get a better home for the same monthly payment.

Between the lower interest rate and the first time home buyer $8,000 tax credit, we are starting to see the really great homes below $300,000 sell and sell quickly. So if you are thinking of buying, then now is really the time to do it. I know it sounds cliche, but the reality is that interest rates will not stay this low, the minute that the markets start coming back they will float back up again. Every time that the interest rates float up, you lose purchasing power. So instead of looking for a $200,000 house, the higher interest rate may mean you can only buy in the $180,000 range. There could be a big difference between the neighborhoods you have to buy in and the size and condition of the house.

I personally think that prices of homes are going to remain pretty steady. I don't think we are going to see further price reductions in the below $300,000 range, but the biggest risk to buyers is not the price of the house, but the interest rate that they are going to be paying. You can at least take control of that aspect of purchasing a new home by purchasing when the interest rates are low.

If you know anyone who is thinking of buying, let me know. I can set them up on an Email Subscription to the Multiple Listing Service. With this service, the client tells us what they are looking for and where. Then as new listings come on the market they are sent to their email. Now they can see addresses, tours, descriptions and all the pertinent data about the homes. This is a great service even if they don't feel they are going to purchase for a while. I have had some clients on this service for 6 months to a year before they decided to buy. These buyers were well versed in what homes looked like in certain areas and were able to make better decisions since they were keeping track of the market themselves.

If you have any questions, please don't hesitate to call me at 801-792-1257.

posted by: Patty Purdue with Utah Select Realty.
your guide through the real estate jungle