Warning: This Might Help you Understand Interest Rates
April 12th, 2008 Categories: Home Buyer Tips
Why is it important for me to understand interest rates?
Well this is a big DUH!
How about saving money or buying a bigger home? If you just get this one concept then you will be ready to go shopping. Interest rates are not just numbers for bankers or mortgage people to review, they are for you. They affect things like your monthly payment and the total amount of money you would have spent on the home to name a few.
Here is an example that was given in an article called “Why Home Buyers Should Understand the Importance of Interest Rate Drops” by Ki Gray
Using a mortgage calculator first let’s look at the difference between the mortgage on a 200k and the mortgage on a 195k house assuming a 6.5 percent interest rate.
200k (6.5%) Mortgage $1264.13 per month
195k (6.5%) Mortgage $1232.53 per month
The difference ends up being $31.60 a month.
Now let’s look at the difference between an interest rate of 6.5% and 6.0% on a 200k house.
200k (6.5%) Mortgage 1264.13 per month
200k (6.0%) Mortgage 1199.10 per month
The difference ends up being $65.03 a month or $780.36 a year. A simple half point drop lowered the mortgage payment by 5.4 percent.
Ki even has a tool for interest rates.
When comparing mortgages, also keep in mind to note the differences in fees, although they may not affect your monthly numbers, you may pay more up front at closing.
Be Sharp, Save Money!
