Thursday, December 30, 2010
Wednesday, December 1, 2010
With a projected market recovery, historically low interest rates, ample inventory and low prices, now may be the time to invest in California real estate. Many first time home buyers lamented the loss of the $8,000 tax credit. However, lower interest rates still provide an opportunity. Today’s mortgage rates are hovering around 4.5%. This is a substantial financial incentive. Each percentage point saved on a home loan equates to about a 10% increase in affordability. With a principal and interest (PI) payment of $2,025 at today’s 4.5% interest a borrower can get a loan of $400,000. If interest rates increase to 5.5% that same PI payment of $2,025 will only allow the borrower $360,000. The extra $40,000 of affordability is a direct result of low interest rates. Each percentage point increase in rates decreases affordability by an additional 10%.