Your Frederick Home Purchase: Mortgage Interest Rates Most Important Aspect of Buying

Friday, February 4, 2011

Considering a Frederick Real Estate Purchase?  Did you know that mortgage rates are the most important aspect of financing a home?

Low rates make a large difference:
I did a little calculating:

A $200,000 mortgage at today’s rate of 4.5%:

• Monthly payment:  $1013.  (Using Bankrates handy calculator)
• After 10 years:  You owe $160,179.  You’ve paid $81,783 in interest, your equity is almost $40,000, if the home would be worth $200K; it will likely be worth more.
• Your payoff date is Aug. 2040

The thing about these low rates that might get overlooked:  If your monthly payment is this low, you probably have enough disposable income to not only buy some goodies, but to make extra monthly payments toward your principle:

• With an extra payment of $100 per month, after 10 years you owe $145,059.
• You will have paid $78,664 in interest.
• Your equity will be roughly $55,000, given your home value remained the same.
• Your payoff date will be Aug. 2035.

Let’s say you got crazy once a year and made a payment of $1000 extra on your Aug. mortgage anniversary:

• After 10 years you would owe $132,717.
• Your payoff date would be Aug. 2032.

This is the magic of amortization.

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The Highland Group
Chris & Karen Highland *    301-831-9947
Turning Point Real Estate T
email us: karen@allthingsfrederick.com
TEXT US:  301-401-5119