Rising interest rates on residential home mortgages have been a hot topic of conversation this past week. The Washington Post noted that “after hitting an all-time low in early December, the average rate on a 30-year, fixed-rate mortgage rose to 5.05 percent … and could climb to nearly 6 percent by the end of 2010, if not sooner, according to mortgage financier Freddie Mac.”
Similarly, US News and World Report noted that mortgage rates will rise in 2010 in their recent “10 Things to Know About Real Estate in 2010.” In its report, US News and World Report cited ”the improving economy and mounting concern over government deficits” as key factors to push interest rates higher. Mike Larson of Weiss Research concludes that ”almost all signs to me point higher,” on the debate of whether interest rates will rise.
We recently asked Wells Fargo Private Mortgage Banker Penny Hill what financial implications rising rates would have on home purchases in Sarasota. Penny and her team ran the mortgage numbers on four of our listings: 835 Norsota Way, 10808 Riverbank Terrace, 3117 Founders Club Drive and 5757 Gulf of Mexico Drive #303.
In each scenario, we calculated monthly payments and the total interest paid for a 30-year Jumbo fixed-rate mortgage. Each scenario is calculated with a down payment of approximately 25%. We compared the cost of purchasing at today’s rates (approximately 5.85%) versus if the rate rose 1% higher.
As you will see in the table below, the cost savings of purchasing a home before interest rates could rise present a dramatic cost savings to the buyer.
Calculations Provided by Penny Hill, Wells Fargo Home Mortgage, 941-361-5731
Please note that these calculations are just estimates, and not all buyers may be eligible for these products. For more information on financing options available for a home that you are considering, please contact a Signature Sotheby’s International Realty associate. We will be happy to provide you with a personalized analysis of a potential interest rate increase and the resulting financial implications.
