Historically low interest rates and what it means to your monthly payments.
Interest rates are continuing to go down. As of this month they are close to 3.4%. It is a historic number and if you are in the market looking to buy you should consider taking advantage of low rates. This assumes you have good credit, a strong down payment and can qualify for the monthly debt obligations. The slide below shows you how much a $100,000 mortgage would cost you in principal and interest (P&I) over the last ten years given the interest rate.
Let us say you want to buy a condo for $360,000. You decide to put down 20% and borrow $300,000. If you multiply $443 * 3 your payment for principal and interest would be $1330.44. If you look at the P&I payment on a $100K mortgage in 2003 and the corresponding principal and interest in 2012 you would be saving $494.25 a month borrowing the same amount of money now versus ten years ago. That is very exciting especially with both home prices and interest rates low it enables you to increase your buying power. In 2003 with interest rates at 6.15%, if you could only afford a monthly payment for P& I of $1,330 you would have qualified for a mortgage of $219K and a corresponding purchase price of $273K. Now you can afford a home worth $360K which is almost a 25% increase in buying power! As a reminder, when looking at your total monthly payments you must include taxes and home owners assessment (HOA) if you are buying a condo. Our mortgage calulator is a useful tool to assist in running all the numbers.
Most analysts are saying that interest rates will probably remain balanced over the next 12 months. No need to hold off on purchase decisions for rates to get lower. With interest rates bottoming out, home prices starting to increase to a certain degree and rents rising in almost every marketplace it has become cheaper to own a home than rent. Check out our Rent vs.Buy Calculator to compare your own numbers.
If you need help in your Chicago real estate home search or wish a morgage consultation with one of our partners, feel free to contact us at 312-953-0961 or vist our site at www.chicagocondofinder.com.