Fort Lauderdale homeowners are among the most perceptive observers of mortgage interest rates. The reason is most likely because mortgage interest rates play such a large factor in the long-term investment that is their home. It’s a big factor in determining how much home they can afford: a factor that determines if and when refinancing makes sense; the factor that plays a large part in heating (or cooling) the overall real estate market.
Generally, home buyers simply accept the mortgage rate that happens to be currently offered when they decide to buy a home. The timing of their purchase is generally triggered by their own financial fortunes, or when the perfect home comes along, or when an unexpected circumstance forces them to find new digs—or any of a dozen reasons other than the current local mortgage rates.
If they even consider how local mortgage interest rates come into play, they may look to financial experts—but only for guidance in how to get the lowest available rates (and that answer is always the same: “you need a great credit score”). Few home buyers consider whether a mortgage rate dip should, in itself, be the determining factor for precipitating their home purchase—but it wouldn’t be such a crazy idea.
Let’s say your home search started when mortgage interest rates were 7%. You found a gorgeous waterfront condo for $1,000,000. You calculate your 30-year monthly mortgage payment on $800,000 – the amount you are mortgaging after a 20% down payment and your closing costs. Your monthly payment would be about $5,322. You decide you don’t like this payment and rate, so you wait several months and the interest rate drops to 5%. However, a similar condo now averages $1,200,000. You put down 20% plus closing costs, and you are left with a mortgage amount of roughly $960,000. Your monthly payment on a 30-year mortgage is $5,153. Your payment dropped by $169.
Does a payment reduction financially make up for the higher down payment? Factoring in that your down payment was $40,000 more, you still save about $50 to $60 per month, or around $21,000 of savings over the course of 30 years. If real estate prices never rose in the neighborhood from the $1,000,000 price point, and you snagged a 5% interest rate — your mortgage would be $4,294. However, the volatility of housing prices and interest rates cannot be accurately predicted to move in your favor.
If all this talk about mortgage interest rates has you thinking of buying or selling a home, contact us! We can help you run the numbers to see how today’s mortgage interest rates will affect your payments.