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Logo courtesy of CNBC
By Amanda Hargrove
Mortgage interest rates continue to hover at historic lows, representing a potential opportunity for homebuyers.
With the COVID-19 pandemic precipitating the most dramatic downturn since the 1940s, the Federal Reserve has been buying mortgage-backed securities to drive down rates. At the start of 2021, the average cost of a 30-year fixed-rate mortgage was 2.65%, according to Freddie Mac—an all-time low.
What does this mean for prospective buyers? For starters, it means they might be able to afford a more expensive home than they could otherwise. After all, a single percentage point can make a huge difference in the buyer’s mortgage obligations over time.
For example, a 30-year, $350,000 mortgage loan with 3.0% interest could end up costing $181,221 in interest over the life of the loan, with $1,475 monthly payments (not including taxes and insurance). By contrast, a 3.50% interest rate would mean monthly payments of $1,571, with total interest payments of $215,796. The lower rate and payment would qualify a borrower for the same loan amount with a $4,100 lower annual income.
Regardless of your client’s price point, these variables can add up significantly for buyers considering how much house they can afford now, and into the future.
From first-time buyers to more seasoned homeowners, it can be overwhelming for anyone to navigate the financial implications of a new home. Help your clients not only find homes they love, but also make prudent decisions that enable them to capitalize on the best of today’s market conditions.
Following are a few interest-related tips that can help empower your homebuyer clients:
Great realtors are passionate about helping people find their dream home. By helping clients make the most of today’s low interest rates, you can also help them turn that dream house into a home-sweet-home reality.
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