30 YEAR RATES

Interest-ing

by Rondi duPont

The recent increase in mortgage rates has started some home buyers to look at programs that have fixed rates for 7 years or 10 years instead of 30 years.

If a buyer believes it is likely they will move or even refinance within this timeframe, these types of programs can be a good option.

The obvious benefit is a lower monthly payment compared to a 30-year program.

Another benefit, which most people underestimate, is the savings in interest.

Today, for example, a buyer would have these options:

5.25% 30-year fixed
4.375% 10-year fixed
4.125% 7-year fixed

Over the first five years of the loan, the buyer would pay the following amounts in interest for each loan program for a $400,000 loan:

$101,126 for 30-year
$83,764 for 10-year
$78,831 for 7-year

So the savings in interest over the first five years compared to the 30-year program is:

$17,362 for 10-year
$22,295 for 7-year

On Sale

by Rondi duPont

Money is on sale (again).

30-year mortgage rates now sit at 3.3%.

This is less than half of the long-term, 40-year average.

This is also almost a full percentage point lower than they were one year ago (which was still very low).

Let’s put this in real numbers.

A $300,000 loan at today’s rates has a $1,313 monthly principal and interest payment.

One year ago, that same loan would be $1,432 per month.

That’s a 8.3% difference in monthly payment.

The fact that money is on sale is one of many reasons that the housing market remains very strong right now.

At Windermere Real Estate we are taking Safer at Home and Social Distancing very seriously. Our people are following our Safe Showings protocol, staying connected to their clients, and providing help wherever needed.