Wednesday, September 5, 2012

Low Interest Rates mean Big Advantages!! (RIGHT NOW)

Rates are low.  We all know this and we have heard the advertisements on the radio "historical lows", "now is the time to buy or refinance", and "purchase power".  But what does all of this mean for the consumer?

Below you will fine 4 scenarios of fictional individuals who are taking advantage of today's rates:

Bill = Move-Up BuyerSally = First-Time Home Buyer;
Rick = Investor Buyer; & Jane = FHA Assumable Loan Buyer



MEET BILL

FHA Loan buyer wanting to stay under the Jefferson County limit of $406,250.
If he purchased today, his rate would be at 3.375% for 30 years fixed rate.
If rates went up to 6% and Bill wanted a 30 year fixed rate, his payment would go up $640 per month increasing the loan amount by $145,000!  Same house, same price, but with different rates; Bill saves $7680 per year by purchasing a home now....

MEET SALLY

Sally is first-time home buyer.  She went to her lender and they qualified her at $200,000 purchase price at a rate of 3.375% fixed for 30 years.  Let's say that Sally decides to wait on purchasing a home and rates are now at 6%.  The difference in Sally's payment would $315.10 per month or a loan amount of $72,000.  She now qualifies for a max purchase price of only $128,000.

MEET RICK

Rick wants to purchase a duplex which is listed for $325,000.  A duplex or up to 4 units requires 25% down payment.  At $325,000, 25% down, 4% rate fixed for 30 years, principal and interest = $1164 per month.  It is now 3 years from now and Rick would like to purchase that duplex after all.  If primary rates would go up to 6% then investor rates will be at 6.5%.  The new payment if rates went up to 6.5% would be $1540.67 per month.   Rick would have an increased cash flow of $376.67 a month or an equivalent of $4,520.04 a year if he purchased his investment now at the low rates!

MEET JANE

Jane purchased a home in 2012.  She had an FHA loan at 3.375% fixed rate.  Eight years later, Jane decides to sell her home.  She can now offer the new Buyer an FHA assumable loan with their purchase.  She has an added "selling bonus" that her neighbors can not offer.  She can offer the new Buyer her loan at 3.375% instead of today's rates of 6% (saving them money each month!).  The potential buyer MUST qualify FHA and qualify for the home, but this will be a strong tool for re-selling your home in the future!

As always, if you have any questions about the above information, please contact myself or your preferred realtor of choice.  Please also remember that the above scenarios are fictional individuals with good credit and income.  Each situation is different, but these examples are meant to only show the advantages of purchasing a home with today's rates!    


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