Jan 30, 2015
It’s an exciting time for prospective St. Louis homebuyers because mortgage rates continue their remarkable downward trend. Rates haven’t been this low for 20 months. What do low interest rates mean for you, a potential buyer? Low interest rates mean that you can buy a more expensive home, for the same monthly payment, as a less expensive home during times of higher interest rates.
To illustrate this idea, here’s an example. With a $500,000 loan and 30 year term at 3%, your monthly payment will be about $2,108. At a 6% interest rate, the monthly amount will be around $2,998, $890/month more than the 3% loan. Since the total outlay is so much less at 3%, it allows purchase of a more expensive home. Basically, instead of spending a lot of money on interest at a higher rate, the money pays down the principal at a lower rate.
Home prices have increased recently, however sustained low rates mean that homes are still reasonable, and buyers’ purchasing power remains healthy. Another positive note is that lenders are approving more mortgages today than they were just one year ago.
One more factor in the mortgage world is job growth. Job growth was over 2.5 million in 2014—great for the economy, but it may result in inflation. Mortgage rates could increase soon in response to inflation rates, which have been unnervingly low for the past few years. Since mortgage rates can and will fluctuate several times a day, it’s a good idea to lock in a low rate as soon as you’re serious about buying a home.
When you are ready to make a move on St. Louis residential property, contact Gladys Manion Real Estate by email or by phone at 314.721.4755. We look forward to making your future home a reality.