Low Mortgage Rates = Greater Buying Power

Traditionally, spring and summer are very hot times to purchase or sell a home; however this year, buyers entered the market a bit earlier to take advantage of the April 30th deadline for the Home Buyer Tax credit. Despite the Tax Credit coming to an end, there seems to be no better time to purchase a home in the greater Burlington Vermont area than right now. Interest rates are incredibly low (in the range of 4.75%) and inventory is plentiful.

With interest rates as low as they have been in many years, homeowners see the opportunity to purchase “up” with little change to their mortgage payments. Buyers see that homeownership is more affordable than renting – especially in the greater Burlington area where apartment vacancy rates hover near 2%.

Heather Myott, our Coldwell Banker Mortgage Advisor, provides some examples of your improved purchasing power based upon interest rates today.

For Example:
• Purchase of $300,000 with 3.5% down payment at mortgage interest rate of 4.750% for a 30 year fixed rate loan = $1,544.15 monthly payment (principal and interest)
• Purchase of $300,000, 3.5% down, 30 year fixed, with a total mortgage interest rate of 5.750% = $1,727.46 monthly payment (principal and interest)
• Total increase in monthly payment of $183.31 or more than $65,000 over a 30 year loan.
• To maintain a monthly payment of $1,544.15 in an economy with an interest rate only 1 percentage point higher, you could only afford a home worth $268,000.
• That is a decrease in purchasing power of $32,000 or 11% less in your home!

Waiting to buy or sell simply does not make sense. Home values may remain stable, with a possible single digit price appreciation over the next 12-18 months, however, when property tax rates and interest rates increase (both projected through 2012), the pool of buyers who can afford that price will diminish.