If you’re in the market to buy a home, are you aware of the impact of mortgage interest rates and their role in a home purchase? They have a large impact on the value of home you’re able to afford.
In the last several years, we’ve seen historically low mortgage rates. While they have fluctuated, they still hover near all-time lows. Recently, we saw a steady increase as the Fed’s interest rates increased, and experts projected that 2019 would encounter steady increases. Just this week, the Fed decided not to raise interest rates; currently mortgage interest mortgage rates are hovering around 3.9%. In recent weeks, we have even seen rates at their lowest since September 2017. That means now is a fantastic time to consider buying if you’re in the position to do so.
When you purchase a home, the amount of the interest rate impacts the purchase price of a home a buyer is able to purchase (assuming the monthly payment is a driving factor for a buyer). With lower interest rates, a buyer could purchase a more expensive house with the same monthly payment.
For simple numbers, we consider a 1% interest rate equivalent to 10% of the price of a house. In other words, a 1% drop in interest rates allows a buyer to purchase a home that is 10% more expensive (with an 80% loan to value mortgage). For example, if interest rates go down 1%, a buyer qualified to buy a $400,000 home with a $320,000 mortgage (80% loan to value) could now have the same payment on a $360,000 mortgage. The buyer could have the same payment on a mortgage of $40,000 more.
This is a huge difference! If you’ve been on the fence about buying a home, now is a great time to consider doing so as you’ll have more options available in your price range. To put this idea simply: when interest rates drop, you can buy a more expensive home for the same payment amount. It could also be a great time to refinance if you purchased a home with a higher mortgage rate.
Summertime is the peak season for La Plata County real estate. We typically see more properties on the market, which means if you’re looking at homes to buy, the inventory at this time of the year offers many options. Coupled with lower interest rates, it could be the right time for the best selection. As always, we would love to discuss this with you, and see if it makes sense for you to consider a home purchase. Also, we have three open houses this weekend: Max at 161 Salt Brush 1-3, Deven at 50 River Oaks Drive from 10-12, and Deven at 37 Lizard Head Drive from 12:30 – 2:30. Stop by and see us!