With home prices back at or above the recent year’s lows, those discouraged by today’s returning prices should also keep in mind the near all-time record low mortgage rates hovering under 3.5 percent, saving borrowers hundreds of thousands of dollars compared to earlier 6 percent rates and literally millions of dollars compared to the historical highs reached in 1981 of 18.45 percent.
Many first-time home buyers have never seen double-digit interest rates and may not even recall the 6 percent and above rates of just a few years ago. According to the Freddie Mac Primary Mortgage Market Survey, the lowest rates were in September 2012 at 3.47 percent; the highest rates were in October 1981 at 18.45 percent. The average interest rates for 30-year fixed-rate mortgages by decade were:
1980s – 12.7 percent
1990s – 9.1 percent
2000s – 6.3 percent
2010 – 4.69 percent
2011 – 4.45 percent
The savings of today’s rates cannot be understated. For example, a $400,000 mortgage at 3.47 percent will have a monthly payment of $1,789.49 and total interest payments of $244,215.30 over the 30-year term. A $400,000.00 mortgage at 6 percent would have had a monthly payment of $2,398.20 and total interest payments of $463,352.76 over the 30-year term. That’s a savings of $608.71 a month and $219,137.46 total over the 30-year term compared with just a few years ago.
Flashback to 1987, a $400,000.00 mortgage at 18.45 percent would have had a monthly payment of $6,174.42 and total interest payments of $1,823,150.42 over the 30-year term.
So yes, while prices are back up, especially in such desirable locations as Newport Beach and Costa Mesa the historically low rates ensure your monthly mortgage payments and overall cost-of-borrowing today are lower than at any time in the past five to ten years. Something to strongly consider in determining if now is the right time for you.
Author Devin R. Lucas is a Real Estate Attorney, Broker and REALTOR®, specializing in Newport Beach, Costa Mesa and Orange County, serving individual, investor and small business interests in real estate. Active with the Newport Beach Association of REALTORS® and Costa Mesa Chamber of Commerce, Devin R. Lucas Real Estate is an independent real estate brokerage and law practice located in Newport Beach, California.
Devin R. Lucas Real Estate
Real Estate Attorney | Real Estate Broker | REALTOR®
devinrlucas.com | firstname.lastname@example.org | BRE No. 01912302
949.478.1623 office | 888.667.6038 fax
2901 West Coast Highway Suite 200
Newport Beach | California | 92663-4023