Sitting on the fence can hurt!
We all saw mortgage rates bottom out this summer at rates
around 3.4%, some even lower. Everyone
has said it’s going to happen, including us here at Shaw Homes. One of the rare topics that most experts have
agreed on is that interest rates are going to go up. In an interview with Tulsa’s mortgage expert
Don Conwell, we asked him about the low rates:
“As much as we’ve enjoyed insanely low rates, the economic path we took
to get there certainly wasn’t worth it.
Especially when you consider the collateral damage that’s still affecting
the country.”
We whined about wanting 4.0% rates again. Don said “Nobody anticipates 30 year rates
below 4% again and I don’t think we want to see the economy or global
conditions that would get us there”. Hang
with us to the end of this post for the good news!
In the early 1980’s, interest rates hit insane levels of around
18 and 19%. In the early to mid 90’s
interest rates were in the 9% range. By
2002 we were seeing rates around 6%.
We are now seeing
rates begin their inevitable climb towards normalcy. Where “normalcy” is going to be is up to
debate, however many agree it will be in the area of 6.0%-7.0%.
Since the start of this summer season, rates have increased
from that low of around 3.4% to upwards of 4.875%. This doesn’t sound like a crazy increase, but
let’s look at the impact on your monthly payment.
For this example, let’s use a purchase price of
$200,000. With 10% down, that’s a
mortgage loan of $180,000.
At a rate
of 3.4% over 30 years, the payment would be $798/mon.
·
10 years of interest = $54,661
·
30 years of interest = $107,735
At a rate of 4.875% over 30 years,
the payment would be $953/mon.
·
10 years of interest = $80,165
·
30 years of interest = $162,927
The numbers above illustrate that just this year, the cost
of waiting to buy a home as mortgage rates rise has cost potential buyers
$25,504 in interest in the first 10 years alone, and $55,192 over 30 years.
Now for the good news:
Getting a mortgage now at 4.875% versus getting one at 6.875% means a
monthly payment of $953 rather than $1182.
That’s a difference of $229 a month!
Shaw Homes has been building
new homes in Broken Arrow since 1985. With new home communities located
in Tulsa, Broken Arrow, Bixby, Jenks, Owasso, Claremore. We also build
homes on private land.
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