Cheap mortgage rates are a bonanza for home buyers.
Currently, home mortgage rates are trending lower which is good news for home buyers. According to a recent Freddie Mac survey, the 30-year fixed rate is 4.28 percent. The 15-year fixed rate is 3.32 percent.
So how important is a lower home mortgage rate for a home buyer?
- At a rate of 6 percent, the monthly mortgage payment for a $200,000 thirty-year mortgage is $1,000 a month ($200,000 x 6% ÷ 12 = $1,000).
- If the rate drops to 4.28 percent, the monthly payment drops to $713 a month ($200,000 x 4.28% ÷ 12 = $713).
- That’s a difference of $287 each and every month.
- Assuming the home buyer makes monthly payments for the entire 30-year period, that’s a savings of $103,320 ($287 x 12 x 30 = $103,320).
For additional information about mortgage rates and the factors that cause rates to increase or decrease go to http://money.cnn.com/2014/03/06/real_estate/mortgage-rates/index.html.
1. What are the common mistakes people make when they finance a home?
2. Why would you consider a 15-year mortgage instead of a 30-year mortgage?
3. Why would you consider a 30-year mortgage instead of a 15-year mortgage?
You may want to use the information in this blog post and the original article to discuss
- Why a home buyer should compare mortgage rates when financing a home purchase.
- The advantages and disadvantages of a 30-year and a 15-year home mortgage.