Unless you’ve been living under a rock of late, you know that escaping discussion and news pertaining to the newly-revised, revamped and retooled Homebuyer Tax Credit has been next to impossible. True, it’s big news. But has the attention that’s been shone on the tax credit been keeping us all from focusing on the REAL stars of the real estate show? Is there something else that ought to have everyone’s tongues wagging?
In my opinion, YES.
Mortgage rates, my friends, are what should be driving traffic into the real estate market and are what will give today’s homebuyers (those who qualify for the tax credit and who don’t) a real incentive to buy.
Look at it this way: when given a credit of $8000, how will most people spend it? Will they save it? Likely not. Will it go toward bills? Maybe. The instinct for most Americans, however, is to spend. This is great for bolstering the economy, but from a personal perspective, it doesn’t help all that much.
Have you ever stopped to consider how much just a percentage point in a mortgage rate can save you over the life of a loan?
For the week ending 11/12/2009, Freddie Mac announced that mortgage rates had fallen to a staggering 4.91%. Not long ago, lenders were delighted to be able to offer a rate of 6.0% (still not anything at which to turn up one’s nose). In a side-by-side comparison, assuming a loan amount of $400,000, a mortgage with a 6% rate will feature a monthly payment of about $2398. The same mortgage at a rate of 4.91% has a monthly payment of $2125. That’s a savings of a little over $270 per month. Nothing to sneeze at, to be sure. Here’s where it gets really exciting, though. Over the course of a 30-year loan, that savings adds up to more than $98,000.
Now THAT is something to get excited about.
Another great benefit of rates falling to record lows is that they give buyers more purchasing power. Less money going toward interest translates into more house for your money. When combined with home prices that, across the nation, are at levels not seen since the early 2000s, a buyer’s purchasing power is very strong, indeed.
If you’re unsure of the amount for which you might qualify, talk to your Intero agent about giving you a referral to an Intero Mortgage loan officer.
The Homebuyer Tax Credit is certainly newsworthy. But it shouldn’t be stealing center stage from the real stars. Mortgage rates and their record low levels are what should be making headlines.