Per­spec­tive on in­ter­est rates

Home - Santa Fe Real Estate Guide - - SANTA FEREÁL MORTGAGEMATTERS - JIM GAY

We all spend a lot of time cal­cu­lat­ing and pre­dict­ing in­ter­est rates, and for good rea­son. The rates greatly af­fect our fi­nan­cial lives. As they slowly move in a direction of higher num­bers, let’s ex­am­ine them from the cor­rect per­spec­tive.

Many of us re­mem­ber the mid 1980s, when rates were at 14 per­cent briefly and we cel­e­brated as they fell to 9 per­cent. Our rates are cur­rently in the high 4 per­cent area (for a 30-year fixed) which seem very ac­cept­able com­pared to those days. Even if rates move into the 5 per­cent range, we still have a his­toric low­mort­gage rate for a pur­chase or re­fi­nance.

As the econ­omy ex­pands and the Fed­eral Re­serve in­creases the bank dis­count rate, mort­gage rates will rise. It is just a mat­ter of how­fast they­will in­crease. But do not let this slow your in­ter­est in pur­chas­ing a home in Santa Fe. The two most com­pelling rea­sons to buy now are (1) In­ter­est rates will prob­a­bly con­tinue to float higher and (2) pur­chase prices will also start ris­ing as we get deeper into 2018 and then 2019.

At to­day’s rate of, say, 4.625 per­cent for a 30-year fixed, what is the monthly prin­ci­ple and in­ter­est and what will it be at a rate of 5.0 per­cent? Lets see: for a 30year fixed-rate loan of $400,000, the P & I will amount to $2,056 per month at 4.625 per­cent and the same loan amount at 5.0 per­cent will be $2,147 per month. At 5.25 per­cent, the monthly pay­ment is $2,208.

Don’t let a small dif­fer­ence in pay­ment pre­vent you from re­al­iz­ing your dream of own­ing a Santa Fe home. And re­mem­ber that as in­creases in­mort­gage rates oc­cur, you will also ex­pe­ri­ence an in­crease in in­vest­ment rates. This means your sav­ings ac­counts at banks, your in­vest­ment ac­counts con­tain­ing bonds, and in­ter­est-bear­ing in­vest­ments will also in­crease in yield.

Please keep the cor­rect per­spec­tive on rates. Sure they will in­crease. Fo­cus on your life goals. If a $100 per month ex­tra mort­gage pay­ment each month will gain you a Santa Fe home, go for it.

Jim Gay was a real-es­tate bro­ker for 20 years and has been a con­sul­tant to For­tune 500 com­pa­nies. He is cur­rently a bro­ker/ owner ofThe Mort­gage Place Inc. (505986-9080) and can be reached at jim@ jim­gay­home­m­o­rt­gage.com.

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