Mortgage Rates
The United States Housing market has seen some substantial declines over the past half decade. Government Efforts, as well as the European Debt crisis have caused mortgage interest rates to reach historic lows. This means that real estate everywhere is on sale.
Current mortgage interest rates can be obtained for less than 4%. If you choose a 15 year mortgage, which reduces the term of your home loan in half, or an ARM (Adjustable Rate Mortgage), these interest rates are even less expensive; closer to just 3%.
Ponder this, since mortgage rate statistics began the average mortgage rate has been substantially higher. In 1981, mortgage rates peaked at more than 18%. Current mortgage interest rates are around the rate of inflation. Assuming that inflation remains normal, the mortgage portion of your interest payment will be equivalent with inflation.
A $100,000 mortgage loan for Sacramento Condos would have an interest payment of only $467 a month. In comparison, at 8% interest, the same real estate loan amount would be $733 a month. That’s a monthly savings of $265 a month, not because you bought a less expensive house, but because home loan rates are so incredibly low.
If you are real estate investing, or contemplating whether to purchase your first home, you need to look at your monthly payment for what it really is. The interest portion of the payment, as well as property taxes are essentially money you are wasting. This part of your house payment is essentially “rent money.” When your interest is going to be more expensive than “rent” for a rental, then you are no better off buying. The current, record low mortgage rates make home buying less expensive than rent for similar properties.
It’s not just a good time to buy because mortgage rates are low, in addition, real estate values are also down. In some areas real estate values are down to the levels they were during the mid nineties. There are some incredible deals out there, especially if you can buy short sale and foreclosure properties.
In general, the current market conditions make it a great time to buy properties.
