Low Mortgage Rates Improve Household Economics: San Mateo CA

Get Your Mortgage Now!! Jed Thibodeau – Bankers Preferred

If you are looking to finance the purchase of a home or refinance an existing mortgage, now is a great time to secure your interest rate.  Here’s why…

One score and 19 years ago, 7.63% was the rate on a 30 year fixed, conforming mortgage.  Today, mortgage interest rates sit a four decade low..  The chart below shows the 30 year fixed, conforming interest rate history from 1971—since the Federal Open Market Committee (FOMC) has been tracking this rate—to September 2010.  Source data for this chart can be found at www.federalreserve.gov.

30 Yr. Fixed Mortgage Rates

Excluding the high interest era of late 1979 through late 1985, the average 30 year fixed mortgage interest rate during the time period is 7.99%.  Currently, a conforming, 30 year fixed rate mortgage can be had at a 4.00%.  If you are looking to finance the purchase of a home or refinance an existing mortgage, now is a great time to secure your interest rate.

To fully grasp the benefit of securing financing while this low mortgage interest rate environment lasts, let’s compare the amount principal and interest in a monthly payment on a $400,000 mortgage at 4.0% and at 7.99%.

On a $400,000 30 year fixed mortgage at 4.00%…

Payment

P&I PaymentPrincipalInterest

% Principal

% Interest

1

$1,909.66$576.33$1,333.33

30.18%

69.82%

2

$1,909.66$578.25$1,331.41

30.28%

69.72%

3

$1,909.66$580.18$1,329.48

30.38%

69.62%

On a $400,000 30 year fixed mortgage at 7.99%…

Payment

P&I PaymentPrincipalInterest

% Principal

% Interest

1

$2,932.27$268.94$2,663.33

9.17%

90.83%

2

$2,932.27$270.73$2,661.54

9.23%

90.77%

3

$2,932.27$272.53$2,659.74

9.29%

90.71%

Notice how much more principal applies to the 4.0% mortgage as compared to the 7.99% mortgage; $576.33 vs. $268.94 on the first payment.  The following pie charts show the payment allocation of principal and interest for the full 30 year term of these mortgages.

30 Yr Fixed Payment AllocationsThe 4.0% mortgage reduces the principal balance faster, builds equity faster and ultimately, helps the household build a strong financial foundation more quickly than any other time over the past 40 years.

To discuss your eligibility for obtaining financing to purchase a primary home, a vacation home, or a piece of residential investment real estate, you’re welcome to contact me at jedt at bankerspref dot com.

Moving? Know the value of your home …