Three Reasons to Take Advantage of Today’s Low Interest Rates

Article by Celeste Magnusson
1. First Time Buyers

Qualifying for a mortgage is a balance of income, existing debts, and capacity to make your monthly mortgage payments. The calculation is made using current interest rates; therefore, the lower the rate, the greater your ability to borrow. For example, last year a $300,000 purchase with 5% down at the five year fixed rate would have required a combined annual family income of $70,000. Today, that same $300,000 purchase at current five year fixed rates requires a combined annual family income of only $59,500. A significant difference, which has made homes that were unattainable in past years, suddenly within reach for many people.


2. Trading Up

For families considering moving up to a larger home, now is the time to consider making that move. Monthly payments are more affordable than ever, and locking in at today’s low rates for a fixed term makes sound financial sense. Take a $400,000 mortgage for example: last year at five year fixed rates, the monthly payment would have been $2100 per month. Today, that same mortgage payment, at current rates, is much less at $1700 per month. That is a savings of $400 per month. Combine this with the decrease in housing prices, and you can get a lot more in a home for your money.

3. Refinancing

Anyone who is currently in a fixed term mortgage should may want to consider refinancing at a lower rate. Although most fixed term mortgages will have a penalty to pay out early, it makes sense to consult a mortgage professional who can help you determine if your interest savings at a lower rate merit paying the penalty now. Not only could you save money in interest over the term of your mortgage, but you could also lower your monthly payment significantly. Plus, using the equity in your home to consolidate debt and pay off high interest credit cards and lines of credit is an economical way to reduce your overall monthly debt payments.