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We wanted to remind you how important it is to take a good hard look at where interest rates are right now and consider whether that changes the real estate equation for you. When I started buying properties in the nineties, interest rates were in the 8s, but today they are in the 3s to 4s. Now you can get a 30-year fixed rate for 3.5% or less with some getting nearly 3% rates recently. These rates have helped made home-buying affordable.
The interest rate makes
a big difference. Consider buying a
$300,000 property with a typical 8% interest rate from the nineties, and your
monthly mortgage payment will be $2,201.29. Ouch!
But if you bought the same property today and took advantage of the
rates, such as 3%, your monthly payment would drop by nearly $1,000 to
$1,264.81. If you’re on the fence about
whether the real estate market is a good idea for you, think about those rates
creeping up to say 5% and what that does to the same payment—it would go up by
almost $400 from the 3% example.
Keep in mind what the
lower interest rate does for building up equity in your home. With the high interest rates in the nineties,
only about 7 or 8% of each mortgage payment covered principal versus interest.
But with a 3 to 4% interest rate, about one-third of your payment goes to
principal. Imagine that! Also, your total payment would be only 70% of
what it would have been back in the nineties, and in absolute terms, your payments
to principal are much greater, so you can accumulate equity much more
quickly. The rate at which you do so
today in comparison to other times in history is remarkable.
If you’re thinking
about buying, now is the time to take advantage of the low interest rates. A 30-year fixed-rate mortgage hovered at a
record-low rate during 2012, but the rates won’t last forever, so there’s not a
better time to buy than now.
If you’d like to talk
about getting into the market, call us today at 202-290-1313 or email us at carlos@enggarcia.com.