March is on the Money

There isn’t a lot of surprise in any of the information that I’ve shared this year in the trends we are experiencing in the mortgage industry. However, we might gain some perspective by considering what a mortgage really represents in the numbers when framed alone by the interest rates.

Yes, 2021 was pretty exciting when we had an interest rate of 3.31 percent on 30-year fixed rate mortgages and the 15-year rate was below 3 percent; but historically, even the 4 percent rates we are seeing are still low in comparison to the long look at mortgages over the last forty years.

Most of us survived the eighties when the average interest rate for a 30-year fixed rate loan reached 18.45 percent. The biggest lesson learned there is that the numbers are just numbers. The numbers can change over time. Your mortgage advisor should be there for all times and should be the constant as you experience home ownership.

Getting into a home is an important goal for most people, but no one ever gets into a mortgage and commits to that mortgage without considering a better mortgage that comes along. That’s why an advisor is important in this process. Figuring out what point to get in and how to navigate the options is really what an advisor is there to do. A great advisor can tell you whether it’s worth the money to make a change and should be in touch to review your goals and plan.

To frame this conversation in numbers, let’s take a look at a $200,000 mortgage for simplicity’s sake. At 3.31 percent, the monthly payment is $877. At 18.45 percent, the same $200,000 costs you $3,088 per month. At today’s 4 percent rate, that money costs $955 per month.

In 1987, interest rates on mortgages ranged between 9.1 percent to around 11.4 percent. In 1994, mortgage rates were variable between 7.2 percent and 9.4 percent. Sometimes home buyers get the idea that the rate that is put out there is what will be offered to anyone applying for a home loan. Quite to the contrary, different lenders offer different rates based on many factors that go into determining a borrower’s credit worthiness.

Working with an advisor can help you to determine what considerations you might be able to make to feel good about buying a home at the interest rate you are able to qualify for. Numbers help us see the value of how we can utilize our money to enjoy the goal of home ownership. For example, one of the options with a mortgage is to pay a little extra each month on the principal. Paying just $100 extra each month on our $200,000 mortgage at 4 percent interest can save $51,216.68 in interest over the life of a 30 year loan because it pays the mortgage off 3 years early. It all depends on what your goals are that you are seeking in home ownership.

As always, be sure to find a licensed advisor that you know is familiar with your region, who serves your best interests, your community, and has history in the community as well as will be there for you for the duration. Call 360-607-9312 or email MPattullo@FinanceOfAmerica.com for help achieving your home ownership goals and to find your best mortgage options. We have the answers that frame the decisions about how to get into the home you want. We are your local advisor.

We lend where we live,
Mike