Tuesday, November 25, 2008

Mortgage Rates Crash: 5.5% for 30-Year Fixed

Bloomberg reports U.S. Mortgage Rates Fall on $600 Billion Fed Plan

The average U.S. rate for a 30-year fixed mortgage ended the day at about 5.5 percent after falling to as low as 5.25 percent, according to Bankrate Inc. It was 6.38 percent this morning…

This is huge. We don’t know if these rates will last another day, week, month, or even be gone by tomorrow morning. Or, maybe they’ll stay with us as long as the Government continues to buy mortgages from Fannie and Freddie.

If you are considering buying a house, here is what this means to you:

  • A $300,000 loan that would have cost $1,872/mo now costs $1,703/mo.
  • A $400,000 loan that would have cost $2,496/mo now costs $2,271/mo.

If you are comfortable with a $2,000 monthly principle and interest payment:

  • Yesterday, you could afford a loan of $320,000
  • Today, you can afford a loan of $352,000…that’s over $30,000 more house.

If you are close to buying, this might be a reason to take action now.

If you are in a position to refinance, this might be too good to pass up. CALL ME IN THE MORNING AND I CAN RECOMMEND SOMEONE TO HELP YOU WITH YOUR LOAN.

Some things to consider about refinancing:

  • There are some costs. Even if you can achieve a slightly lower payment, it might not make sense.
  • During the first few years of a mortgage, you are paying mostly interest…meaning that, if you refinance every few years, you are never going to make any progress towards the principle. You might be better off keeping you higher rate if more of your payment will go towards principle.
  • Loan qualifications have changed dramatically over the last 6 months. Before wasting time and money, talk your scenario through with your lender. Again, if you need recommendations of good, honest, direct lenders, please let me know.

Finally, if you are trying to sell your home, these low rates will definitely get some buyers off the fence and writing offers. Your best opportunity to sell is now. Take advantage of it.

This is a big deal. If getting a fixed 5.5% loan is important to you, I strongly urge you to take action now. Tonight. Tomorrow morning.

Please forward this info on to friends and family. This could help them save money. In times like these, saving cash is a big deal.