Frequently, lenders email me updates about the current mortgage market. This week, I got an email from Mike Weldy at Prime Lending. Titled “The Perfect Storm”, it outlined the following:
- A “Perfect Storm” of low purchase prices and historic low interest rates
- Compare this example:
$250,000 purchase price at 4.5% (which recently closed)
Versus
$250,000 purchase price with a 6% rate (possible interest rate in 2011) - The projected payment would jump from $1,267 to $1,499! (an increase of over 18% )
- If you believe house values will fall further, consider this: if you were to purchase this exact home for $225,000 at 5.5% (assuming taxes, insurance, and HOA were the same), your projected monthly payment would still be higher at $1,278!
- Therefore, from a payment perspective, IF the market dropped an additional 10%, it would still be a lesser monthly payment to pay the higher sales price at the lower interest rate.
I like playing with numbers, so I thought Mike’s scenario was a perfect way to lay out the situation in today’s real estate market. If you want to talk through your scenario to see if now might be a good time for you to finance a home, call Mike directly.
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