While 2020 was a challenging year 2021 is off to a good start. It seems that the exodus from New York State is continuing and home sales are supported by historically low mortgage interest rates. The first mortgage that my wife and I had in the early 1980’s was 13%! I remember asking my father what his mortgage interest was when he and my mother bought their first house circa 1958 and he said that it was, “6%”.
So for those buying a home these days, a mortgage interest rate of 2.5% is truly historic. Here is a comparison.
- For a $200,000 mortgage, 30 year term at 6% results in monthly principal and interest payments of $1199/month. Over 30 years, to borrow $200,000 you’ll pay a total of $431,676. You’ll pay more in interest than the original loan amount!
- For the same $200,000 mortgage. 30 year term at 2.5% results in monthly principal and interest payments of $790/month. Over 30 years, to borrow $200,000 you’ll pay a total of $284,487.
- 6% vs. 2.5% saves the borrower, over 30 years, $147,189!!!
I believe a combination of the flight from the big apple and low rates will support a good real estate market in 2021…let’s hope.
Here are a few homes we’ve inspected so far this, new year.