On the Fence?

photo courtesy of www.gatesnfences.com



Every Wednesday morning all of the agents at Townsend Real Estate meet for our weekly sales meeting.  We discuss different topics such as the firm's production, market statistics, the real estate contract, and issues that we have recently faced.  One of the first things we always mention are the current interest rates for a home mortgage.  Today it was discussed that rates were 5%.  If you look back at history this is an incredible rate for a home loan.  But if you look back over the past year this is as high as it has been.  When I bought my first home in 2005 my rate was 6.25% and at that time it was unreal that rates had gotten that low.

What difference does all of this make?  It means that as far as monthly payment goes it will cost you more to buy a house today than it would have last year.  You should also look for rates to gradually increase meaning it will become only more expensive to purchase a home.  Let's take a $200,000 mortgage and look at only principal and interest.  Other costs in a monthly payment are taxes, property insurance, and maybe mortgage insurance. If you purchased this home at a rate of 4.25% (which is what it was for much of the last year) your monthly principal and interest (p&i) payment would be $983.88.  With rates being 5% today that same home would now cost you $1,073.64.  If you are on the fence about buying a home and you wait until rates increase to 6% this same house would cost you $1,199.10 per month.

My advice is that if you are thinking of buying a home soon you should do it now.  The inventory that you have to choose from has never been better and even at 5% interest rates are great.