Don't Underestimate the Impact of Lower Mortgage Rates

With the recent financial turmoil in the market, one positive side effect has been another drop in mortgage rates. While the rate drops may seem trivial to many, the truth is, on a mortgage, the impact of lower rates can be significant and should not be underestimated in the home buying decision.

I'll use a few examples to illustrate the impact. Let's say you have a 30-year fixed mortgage of $100,000 at 5%. The payments (principle and interest) would be $536.82 and over the life of the loan (assuming you would pay it for the full 30 years) you would end up paying $193,255.78. Now, look at the difference for the same mortgage at 4%. Payments would be $477.42 and, over the life of the loan you would pay $171,869.51. That's a difference of over $59 per month in payments and over $21,000 less over the life of the loan.

Even a one half percent (0.5%) drop in interest rates on the same amount, is the equivalent of a 5.5% drop in price on the home. So for those buyers who continue to wait for home prices to drop further before entering the market, may see their perceived savings evaporate if interest rates move even slight up from their low levels now. Clearly, the interest rate movement is far more volatile than the home prices so anytime rates move down, the overall price of home ownership becomes even more affordable.

So, with interest rates falling again, now is the best time since November of last year, to make your move if you are sitting on the fence waiting to enter the home buying market. Waiting could end up costing you thousands of dollars - a bigger difference than you may have thought...but now you have the scoop so....what are you waiting for... they call it a buyers market for a reason.

To get more information on pre-qualifying for a mortgage or to begin your home search in the East Texas area, visit our website at http://www.spotlightteam.com/.