As of today interest rates on a 30 year mortgage with no points is hovering around 3.875%. You may wonder if that is a good rate. Revisiting the past can shed some light on this question. If we look back 10 years it was January 2002. We had just lived through the horrific events of 9/11 and real estate sales were reeling from the trauma of that awful autumn.
Interest rates at that time were at 7.375% with no points! At the time this was a great interest rate. To put this into perspective, let’s look at the difference in payments from 2002 to 2012.
For a $200,000 mortgage the payment in 2002 would have been $1,381.35 amortized over 30 years.
In 2012, that same mortgage amount with today’s low interest rates is $940.47– a savings of $440.88. But here is where the power of the interest rates gets very interesting.
Let’s assume that one can easily afford the $1,381.35 payment of 2002, what does that do to the amount borrowed? The payment with the lower interest rate now allows the same buyer a mortgage amount of $293,700. The lower interest rates allow you to purchase a bigger home for the same price.
If you are thinking about upgrading your home now is an opportune time to take full advantage of the low market rates.
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