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How much mortgage rates impact your monthly payments

Stop and listen to how mortgage rates impact your monthly payments

If you are taking advantage of these phenomenally low rates and financing your real estate purchase you may be surprised to know how much mortgage rates impact your monthly payments. Everyone knows lower interest rates are better and will save you money. Not everyone realizes just how much though.

4.5% Interest rate vs 3%

Let’s say you bought a $500,000 home a few years back when interest rates were at 4.5%. You put 20% down and got a 30 year fixed loan. Your monthly Principle and Interest (P&I) payments would be about $2027 for the next 30 years.

Fast forward to 2020 with today’s low rates. Let’s say you buy a $600,000 home with 20% down. You do have to come up with a little more down payment than you did with the $500,000 home. However, if you can get a very realistic 3% rate, your monthly P&I would be about $2024. Almost the same payment as the $500,000 home cost at a 4.5% interest rate.

By my calculation, a 1.5% change in interest rates can equate to $80,000 – $100,000 in purchasing power. That’s pretty amazing.

A small change in interest rate can equate to a big change in purchase price.

Disclosure

We are real estate agents, we are not mortgage brokers. Mountain Living Real Estate cannot quote you current rates or payment scenarios. Besides, every situation is different. We simply plugged numbers into our mortgage calculator and came up with this scenario. Try it for yourself and see just how much mortgage rates impact your monthly payments. The results may surprise you.

Reduce your interest rate

So how can you reduce your interest rate? There are actually a few options.

  1. Pay points. That basically means buying a lower interest rate. You are paying the mortgage company now the amount they could collect over the years. Generally, you have to stay in your home, without refinancing,for several years to make this option worthwhile.
  2. Put more money down. Additional money down will lower the risk to the lender and generally net you a better interest rate. Simply going from 20% down to 25% down can reduce your rate substantially. Discuss your options with your lender to determine if it’s worth the additional money out of pocket.
  3. Improve your credit score. The higher your score the better interest rate you may be offered. A score higher than 740 can offer you the best rates available. Improving your credit score substantially can take a lot of work and time. Small improvements may be a realistic option if you are close to cracking the next credit score bracket.

Low interest rates boost your purchasing power. The low interest rate climate we are experiencing now gives people the ability to afford a more expensive home while keeping their monthly payments lower. Low interest rates are predicted to last for a while yet. There is, however, no guarantee.

Posted in: Buyer Tips Tagged: Interest Rates

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About Us

Mountain Living Real Estate, a.k.a. The Mountain Living Team, is a family owned, second generation, real estate company that has been helping buyers and sellers in Summit County since the early 90’s.  Mountain Living Real Estate is committed to going above and beyond to ensure their clients have the most amazing real estate experience possible.  Jason & Meredith take a personal approach to educate their clients, empowering them to make high quality decisions no matter the situation.  They take exceptional care throughout the sales process and beyond; striving to make each client’s path in Summit County one filled with fun, excitement & great memories.

Work with Mountain Living Real Estate and you’ll understand why so many people say, “We Love Mountain Living!”

Testimonials

Jason used amazing strategy for pricing, selling and acquisition of our next property. In this market this strategy is critical for success – especially with the buying process.

Summit County real estate is a challenging market. We have bought and sold two properties and just bought our third. Jason and Meredith have been there for us throughout this entire journey, and we couldn’t be more satisfied. Jason and Meredith have excellent communication, are realistic and honest, and have incorporated strategy and wisdom from their extensive Summit County experience to help us make our dreams come true.

Ben from Centennial February 2, 2022

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You were very knowledgeable and supportive during this transaction. I was most impressed with your calmness and smart decision making during a chaotic process. Thank you again for your calmness during all of this.

Barbara from Centennial January 24, 2022

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Contact Us


Jason and Meredith Adams

Jason & Meredith Adams
Mountain Living Real Estate

101 Main St, #109, PO Box 4115 Frisco, CO 80443

(888) 666-0844
team@mountain-living.com

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Jason & Meredith Adams are both licensed to sell real estate in the state of Colorado

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