Seth Neal || 208.515.2165 || seth@boiserealestateguy.com

Do Mortgage Rates Matter?

In a word, yes. Its really that simple. Mortgage rates matter a lot when you are considering a home purchase!

You might remember a couple weeks ago I talked with Katie Crandlemire about  getting a home loan after bankruptcy. Well, Katie being Katie (read: awesome) emailed me an interesting graphic yesterday showing Freddie Mac’s 20 year average for 30 year fixed rate mortgages. Its an interesting and revealing look at the last 20 years… and it got me thinking.

But first, a couple of disclaimers:

  • I don’t know if mortgage rates are going up or down (although after looking at that info-graph I have a guess)
  • I don’t know if that home you love is at the bottom of the market or not (although I’m willing to bet we are on the low end)

Sorry. I just don’t know the future. If I did I would be on some island resort on permanent vacation.  I know that is extremely unhelpful, but honestly no one knows these things.

But what I do know is that buying LOW and selling HIGH makes sense. That’s my goal for almost all my investments.

So why don’t you factor in mortgage rates when you are considering whether now is the right time to buy or not?

You found the perfect home that’s in your $150,000 price range.

  • You have 3.5% Down
  • You get the 4.85% rate
  • Your total cost of the home is $292,148.48

That’s the cost of borrowing money for 30 years. And its a very good thing.

BUT, you have an ace up your sleeve, your grandmother bequeathed you a magical crystal ball and you know for fact that this same home can be bought for $140,000 in 6 months! But you also know interest rates have increased 5.85%; still below the 20 year average, but up 1% none the less.

Similar perfect home that’s $140,000.

  • You have 3.5% Down
  • You get the 5.85% rate
  • Your total cost of the home is $310,225.57

Your grandmother’s crystal ball just cost you $18,077!

And all because you didn’t factor in your mortgage rate when you considered the cost of your home. The next time you are considering whether now is the time to buy, remember to consider mortgage rates. They are just as important as the actual cost of the home.

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Seth Neal

Realtor and full-time Real Estate agent in Boise, ID! And by agent, I mean Real Estate Ninja. Basically I’ll do things like return your phone call and not treat you like a jerk. Connect with me on Google+.

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