When you’re home shopping and looking at every little number, keep in mind that even half a percent makes a huge difference. Half a percent of what, though? Specifically, your interest rate. Don’t believe me? Here’s the breakdown.
Let’s look at your average $300,000 home. You’ve put down a $60,000 down payment and locked in a 5.0% interest rate. This rate is not uncommon in these first few months of 2019. With a mortgage loan then of $240,000, you’re looking at an average monthly payment of roughly $1,288. Because of your interest rate, the full 360-months of payments equates to right at $463,813. This means the total interest paid over the life of the loan is almost $225,000. Pretty intense, right?
Imagine you had this same set-up but with an interest rate of 4.0%. Everything is the same: the purchase price, the down payment, and the total life of the loan. This lower interest rate brings your payment down to $1,145. You’re also looking at a total payment of $412,486. This represents a total of $172,486 in interest. A savings of $50,000 over thirty years.
Imagine what you could do with that!
This is why it is of the utmost importance to keep an eagle eye on interest rates. If you’ve been going back and forth on whether it’s the right time to buy, a sudden drop of even half a percent can equal big savings for you.
Interest rates for 30-year fixed rate mortgages in 2019 have been sitting between 4.5 to 5.0%. However, depending on your lending institution, you may be able to snag one closer to 4.0%. Always shop around to see what you can find.
Questions? I’d be happy to answer any that you have and help get you moving on your path to home ownership.
Thanks to thestreet.com for content inspiration.