Great news for homebuyers! Mortgage rates have recently dropped from 7.25% to 6.11%, significantly impacting affordability. Let’s break down what it means for you when mortgage rates drop, especially if you’re considering buying a home.
When mortgage rates drop, your monthly payments become lower, allowing you to afford a more expensive home or save on your existing budget. Let’s look at the impact of this rate drop on a $400,000 home with a 30-year fixed mortgage.
At 7.25%:
Monthly Payment (Principal and Interest):
$400,000 loan amount at 7.25% = $2,728/month.
At 6.11%:
Monthly Payment (Principal and Interest):
$400,000 loan amount at 6.11% = $2,430/month.
That’s nearly a $298 per month saving! Over the life of the loan, you could save over $107,000 in interest alone.
What Does This Mean for Affordability?
Using the 28% rule (spend no more than 28% of your gross monthly income on housing), if your budget was $2,728/month at 7.25%, you would now only be spending $2,430/month at 6.11%. This means you could potentially afford a more expensive home without increasing your budget. Alternatively, you could keep your budget the same and enjoy the savings.
For instance, at 6.11%, that $298 could be put towards other investments, savings, or even upgrading your home features. The lower rate opens up options that weren’t possible when rates were higher.
Bottom Line:
With mortgage rates dropping, it’s a great time to reassess your home buying options. Even a small drop in rates can make a big difference in your purchasing power and long-term savings. Consider speaking with a mortgage professional to see how you can take advantage of this rate drop today!
Thanks for reading,
Chris
