Why Low Interest Rates Are So Important

I want to make sure the home buying public is informed about the financial side of making a home purchase with regards to rates.

Less than 6 months ago, you would probably have been quoted rates in the 6-7% range, which is still a historically low rate. Currently, I just locked a client in at 5.25% last week and we expect rates to stay low for the next month or so at the least.

While some San Diego real estate buyers are so focused just on home prices, a drop in rates of this magnitude will make a much larger difference long-term than most people realize. I make sure that all of my clients are informed of what this means, so that they can make an intelligent and informed decision that makes the most sense for them. Here are the numbers of a few different loan amounts for you to see the difference in black and white:

Scenario 1: $300,000 Loan Amount:

- On a $300k loan amount, a 30-year fixed at 5% would cost you $1610/mo

- The same purchase at 6% would cost you $1798/mo

- If rates went just from 5 to 6%, prices would have to drop 10% or $30,000 for you to get the same payment.

- That's $188 savings/month, $2256 savings every year

Scenario 2: $500,000 Loan Amount:

- On a $500k loan amount, a 30-year fixed at 5% would cost you $2684/mo

- The same purchase at 6% would cost you $2997/mo

- If rates went just from 5 to 6%, prices would have to drop 10% or $50,000 for you to get the same payment.

- That's $313 savings/month, $3756 savings every year

Scenario 3: $800,000 Loan Amount:

- For a Jumbo loan, rates are higher, so I used 6% and 7% to illustrate my point

- On a $800k loan amount, a 30-year fixed at 6% would cost you $4796/mo

- The same purchase at 7% would cost you $5322/mo

- If rates went just from 6 to 7%, prices would have to drop 10% or $80,000 for you to get the same payment.

- That's $526 savings/month, $6312 savings every year

I hope that these numbers were sufficient in making you understand the difference that low rates make. Here is another major related point: because informed home buyers and investors understand these numbers, these extremely low rates will increase demand keeping home prices from falling.

Now that you are armed with this information, feel free to search all San Diego homes for sale at my website.

Adam Pascu
Team 73 Degrees
Keller Williams Realty
858.761.1707

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