28/07/2011

Did you know : In June 2011, mortgage rates changed every 3 hours, 23 minutes on average.

With mortgage rates changing as rapidly as they are, your client’s home affordability can be short-lived. Consider the budget-busting impact of rising mortgage rates.

For every 1 percent rise in mortgage rates, a buyer’s maximum purchase price falls 10.75%.

For example, if your buyer has 20 percent to put down and sees a $300,000 home, today, he can borrow at 4.500% and pay $1,216 monthly. But your buyer wants to wait for a price reduction and, 4 weeks later, he gets it — all the way to $285,000. He’s ecstatic. Until he talks to his lender and finds out mortgage rates are up 1 point.

That same home — selling for $15,000 less — now costs $1,295 to carry. It’s a $79 monthly increase, and $28,440 in extra payments over the life of the loan.

This is why it’s foolish to “time” the housing market.