Mortgage Update - Mortgage Rates Under 5%
By Liz Moeller, Centennial Mortgage
December 4, 2008
Interest rates under 5%?
Rates came down last week to as low as 4.99%*!
What does that mean for buyers?
It means that the cost of buying a house just went down! Or, it means that they can afford more of a house for the same monthly payment. I don’t usually do math problems in these Mortgage Updates, but this situation screams for an example using real numbers.
- If a buyer was buying a house and getting a 30 year mortgage for $200,000 at 6.5%, the monthly payment would be $ 1,264.14.
- At a rate of 4.99%, that same $200,000 mortgage would now have a monthly payment of $1,072.42.
- That is $191.72 less per month for the same mortgage loan!
Another way of looking at it is that a buyer can afford more of a house for his or her money now that rates are lower. Let’s pretend that a buyer wants to keep his or her monthly payment around $1,500.
- If rates were 6.5%, then the maximum mortgage amount would be $238,000 with a payment of $1,504.32 per month.
- At a 4.99% rate, the buyer can get a mortgage for $ 280,000 for $1,501.39 a month.
- This means that a buyer can get $42,000 more money for the same payment!
Rates like this make now a great time to buy!
* APR 5.258% based on a $200,000 loan amount and 1.5 points. Rate assumes credit score of 740+ and a 20% down payment. Rates as of 12/4/08. Rates and points can change at any time without prior notice.
