Did you know that you can buy a bigger and more expensive home with low interest rates?
Purchasing a property, such as a home, becomes more affordable whenever there is a decline in interest rates. Home sales often increase as more buyers in the US can take out low-cost mortgage loans.
In a COVID-19-created environment characterized by inventory shortages, homebuyers have one significant advantage in the form of very low interest rates. Home loans in the US have never been more affordable as long as you can find a willing lender.
Did you know that the average interest rate on 30-year fixed mortgages has plummeted below 3% for the first time? And this means it is a great time to finance a bigger and more expensive home. You can make the most of the US Federal Reserve’s recent financial efforts to pump more dollars into financial markets in order to support the US economy during the pandemic. Also, keep in mind that during periods of low rates, the volume of home construction increased to keep pace with rising demand.
While home prices in the US have maintained their upward trajectory during the coronavirus, low rates mean a long-term benefit for most home shoppers, particularly first-time millennial buyers, who can purchase today.
Whenever interest rates decline, people, in general, are more inclined to borrow funds since it will cost them considerably less now than at a later time. And the savings are significant.
For example, on a mortgage of about $285,000 (the national median home price), note that the decline in interest rates during the last year can save over $100 per month in payments, and about $50,000 over the entire course of the loan. The savings can be much more substantial in higher-cost coastal areas.
There is no denying that lower rates also give homebuyers considerably more purchasing power. For example, on a 30-year mortgage with a 5% interest rate and a $1,000 payment (monthly), allows a homebuyer to afford a home worth $186,282 easily. And if that interest rate drops to 4%, then you can afford to buy a bigger property worth $209,461 with the same monthly payment. This represents an increase of about $23,000.
So, with lower interest rates, you will be able to purchase a larger home for the same amount of money as a condo or small house more than a year ago. And this makes it very ideal for homebuyers who face problems looking for a nice home within their tight price range. This is because more options are now available.
Did you know that mortgage rates link closely to Treasury yields? And these days, the treasury rates in the US are historically low. Note that lower interest rates also make mortgage lenders in the country very competitive. And this means that buyers can get mortgage loans with extremely favorable loan terms.
For example, you may be able to negotiate and have various junk fees removed, like application fees, origination points, and processing fees.
Housing prices are quite stable now, and interest rates are near rock bottom. This means you may qualify to buy a bigger house without increasing your monthly payment.