Keller Williams Realty Atlanta – Peachtree Road
You Think The Homebuyer Tax Credit Has Passed?
Think Again!
As was mentioned in the KW Atlanta Peachtree Road Office sales meeting this morning, let’s just think of the homebuyer credit from a different perspective. The average of the 30 year fixed rate mortgage from 7/1/2000 through 7/1/2010 is 6.75%. Today we are at 4.50%
How Much Does That Save a Buyer?
On a loan amount of $250,000, the principal & interest at the past 10 year average rate of 6.75% is $1622/month
The principal & interest at 4.50% is $1267/month. That is a savings of $355/month. Over the average stay of 5 years in a home, that creates an interest savings for the 5 year period of $21,287. This certainly makes the expired homebuyer tax credit pale in comparison.
How Can I calculate the Savings for a Specific Loan Amount?
Regardless of the loan amount, the difference in interest rate will save you interest payments of 8.51% of your loan amount over a 5 year period OR it will save you interest payments of 1.7% of your loan amount per year. As an example you can apply at any price point, a loan amount of $150,000 will save you $12,765 in interest payments over a 5 year period ($150,000 x 8.51%) or $2550 per year ($150,000 x 1.7%).
How Can FHA Loans Help Me 5 Years From Now?
Another talking point for potential buyers is regarding FHA loans. FHA loans are ASSUMABLE and that can be a real win situation for homebuyers today. A buyer who obtains an FHA loan today with a minimum down payment of 3.5%, who decides 5 years from now to sell may end up with a tremendous market advantage when they sell. Let’s assume a home purchased today at $175,000 increases in value 2% per year for the next 5 years. Value in 5 years is approximately $193,200 Assuming the borrower made the minimum down payment of 3.5% when they purchased and including the principal reduction they made over the 5 years, they probably have a payoff of approximately $153,400. The loan balance of $153,400 would be assumable at the initial rate of 4.5% to the new buyer which would require the new buyer to make a down payment of 20%. If current interest rates in 5 years are just average at 6.75%, that would make the home extremely attractive to have 4.5% financing available in a 6.75% market – especially if you are the listing agent!!
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