Why it Might Be Cheaper to Buy Now
Mortgage rates are nearing the 5 percent mark, prompting many home buyers to rush to take advantage of rates while they’re still low.
“Most people agree it is only a matter of time before rates hit 5 percent,” Peter Grabel, a mortgage loan originator at Luxury Mortgage Corp. in Stamford, Conn., told realtor.com®. “The housing market has clearly turned the corner in most areas. I think a year from now, people will look back and realize that this was a great buying opportunity.”
Some forecasts show rates could edge even higher to 5.5 percent or even 6 percent in 2014. The Federal Reserve has announced that it will soon start tapering its $85 billion monthly bond-purchasing program, which is expected to send mortgage rates rising from recent record lows.
Currently, 30-year fixed-rate mortgages are averaging 4.2 percent, according to Freddie Mac.
In a recent blog post, realtor.com® illustrates the effect of rising mortgage rates on buyers’ pocketbooks:
Example: A buyer gets a 30-year fixed-rate mortgage at a 5 percent interest rate on a $300,000 loan.
Monthly payment: $1,610.46
Total payment: $579,569.69
Total interest: $279,769.69
Example: A buyer gets a 30-year fixed-rate mortgage at 6 percent interest rate on a $300,000 loan.
Monthly payment = $1,798.65
Total payment = $647,515.44
Total interest = $347,515.44
The buyer with a 6 percent interest rate would pay about $67,746 more over the life of a loan than the buyer who was able to get an interest rate at 5 percent.
Source: “Buy a Home Now or Pay More Later?” realtor.com® (Oct. 8, 2013)