Loan rates are still remarkably low, but will they stay that way for long? by Joel Javan It's really hard to predict what will happen to mortgage loan rates, some experts say it will go lower, some say rates will increase. A lot are just safely saying it's volatile. Truth of the matter is, no one really knows for certain. I was told by those who keep track of trends that in the past whenever it's an election year, rates go down and then up again after the elections. Whether this is accurate or not, I think the best thing to do is "strike while the iron is hot!" Buyers are aware that this is the best time to purchase a home, including first time homebuyers. In my last several Open Houses, a lot of those who came are renters. So what are they waiting for? Someone said to me that this is not a Buyers' Market, instead it's a "Reluctant Buyers' Market." They are all waiting to see what will happen. They believe that we have not hit rock bottom yet, that prices will still go down, and they're waiting for that "perfect time." I personally believe that the market will start to pick up soon, but that's just me. So let's just say that prices will drop some more, let's see if buyers will really benefit from waiting... Let's look at a $400,000 home with a rate of 6% on a 30 year mortgage (remember, these are just estimates and do not include any applicable HOA fees, home insurance, taxes, etc.); the monthly payment would be $2,398.20. Should the price drop by $20,000, but the rate increases by just a measly 1% - the payment on a 30 year mortgage for $380,000 with a rate of 7% will be $2,528.14. That's an increase of $129.94 a month. You're most likely thinking it's OK because you got the house for $20,000 less anyway, but is it really OK? 12 years of paying $129.94 more every month, you would have exhausted that $20,000 already, which, I think, means it's really not OK. You're better off putting that extra $129.94 a month in an investment with an 8.0% return - you'll probably end up with more than $20,000 at the end of 12 years (consult your accountant or your financial advisor). OK, so now you say, but what if the price is reduced by $30,000? Alright, let's look at that scenario: $370,000 with a rate of 7% for a 30-year mortgage means monthly payments of $2,461.61 - you still have to pay higher. What about $40,000 lower? Monthly payments for that is $2,395.08. OK, now you're saving $3.12 a month, which is good, assuming that the house of your dreams is still be available after all that time you spent waiting. Again, "strike while the iron is hot!" Mortgage Calculator Joel Javan can be reached at (661) 607-1577; (661) 607-1577; JoelJavan@YourNotSoSecretAgent.com; www.YourNotSoSecretAgent.com EXIT Realty SCV is independently owned and operated. Equal Housing Opportunity. Back to List of Articles. Links that might be of interest to you: Passive Income Through Real Estate Multiple Streams of Residual Income Watch this video to see how you could make $43,944.75 in 30 days Get cash for your real estate cash flows Zero Investment Online Opportunity Save 50-70% on BRAND NAME Kidswear Apparel and accessories for girls, women, boys and men