Looking to buy a home in Coeur d'Alene? Here is a closer look into mortgage rates.

Posted on March 18th, 2010 in Real Estate News, World Real Estate News, General Posts

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mortgageWe all keep hearing that mortgage rates are going to increase over and over, but they are still low. Are they really going to increase? The simple answer is yes.

The Fed has committed to purchasing mortgage bonds through March 31, 2010. They have already slowed their purchasing. It has even been estimated that the Fed is purchasing nearly 75% of the mortgage bonds. If they are not purchasing bonds, the rates will be higher even if other players step up their buying. There is not much hope of the Fed extending the mortgage bond purchasing program. They have specifically stated that they will not be extending the program.

With short term rates being so low, it is easy for large institutions to borrow low and then invest in mortgage bonds and make money on the interest rate spread. If short term rates start to increase, this will diminish mortgage bond purchasing even further and push rates higher.

Forecasts show that the 30 year rate may be in the mid 6's by the end of 2010 with a volatile rate market throughout the year.

So, now that we got all the technical information out of the way, here is an example of how a rate increase can change the cost of home ownership:

  • Loan amount of $240,000 and a purchase price of $300,000 with 20% down. The principal and interest payment at 5% is $1,288.37.
  • If the rate increases to 5.5% the same payment ($1288.37) would result in a loan amount of $226,910 or $13,000 less! With 20% down, this is a purchase price of $283,635.
  • If the rates increase to 6% the same payment ($1288.37) would result in a loan amount of $214,890 or $25,110 less. With 20% down, this is a purchase price of $268,612. (This is a purchase price drop of 10%!)

In summary, this means that it may be the perfect time to purchase the home in Coeur d'Alene you have been considering. Be it waterfront homes, land or investment property in Coeur d'Alene, now is the time to invest for your future.

For a free market study in Coeur d'Alene, contact a Black Rock Sales Professional today using our contact us page or toll free at 866-558-2050.