Buyer TipsReal Estate Stats and TrendsRealtor BenefitsSeller Tips July 7, 2010

The Price of Money

For what it’s worth, prices have remained steady and the lure of extremely attractive mortgage rates do seem to be getting some buyers to take action. It’s debatable, but many think that interest rates will rise, sooner or later, if for no other reason than they “can’t get any lower.” For a fun little example, let’s do the math on one scenario. Currently, if you were to put 20% down on a $400,000 home, an 80% LTV (Loan to Value) mortgage balance of $320,000 would have a monthly principal and interest payment of $1,598 for a 30yr fixed loan at 4.375%. Now, if prices were to decline 20%, but mortgage interest rates rose 2% to 6.375% (last seen in 2008), the same property now priced at $320,000 but with an 80% mortgage of $256,000, would have the same monthly mortgage payment of $1,598!

Obviously, there are many factors to consider in a home purchase or sale, so contact me for a free consultation for your situation and I will help you sift through all the “noise.”