Have you taken advantage of the low interest rates on home mortgages yet? Rates over the last year or so have dropped down to the 4 percent range. This plus the first-time homebuyer credit and falling home prices have made it one of the easiest times for people to purchase their first home.
Valerie RumboughFor those of you who are refinancing, it has also been a great year. However, if you haven’t taken advantage of this yet, you need to consider it soon, because rates have already started climbing. Rates are now in the 5 percent range, and may continue to climb.
Some of you may be waiting to purchase a home, hoping that home prices will drop. However, when you consider the difference that a 1 percent increase in mortgage rates makes, you may find that it is better to pay more and get the lower rate.
For example, a $100,000 mortgage at 4.5 percent for 30 years will cost you $507 per month. At 5.5 percent, the payment jumps to $568. Over the 30-year period, you would pay $22,000 more for your home. To keep the payment at $507, your mortgage would need to be only $89,000.
Of course, you need to make sure you can afford the mortgage before you jump into home ownership. In addition to the principal and interest payments, you need to also consider taxes, insurance, maintenance, moving in, etc.
If this is something you are considering, take the time to “run the numbers” and see what works best for you. Happy house hunting!
Rumbough, CPA, CFP, is chief operations officer with the Baptist Foundation of South Carolina. Contact her at 800-723-7242. In accordance with IRS Circular 230, any U.S. federal tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.