Shopping for a new home can be a tricky process. It requires a pre-approved mortgage, down payment and the right real estate agent.
Even with all the right things in place and the perfect Nashville home, you may still pay more for the home than you should. Understanding how much a 1% difference in your mortgage interest rate makes can change your decision.
Interest Rates are on the Rise
Last year the mortgage interest rates were between 3% and 4%, but they are expected to rise. By the end of this year, many predict they will climb to an average close to 5% and by 2015 that average will be 6%.
How Much does 1% Matter?
When looking at a $300,000 home, it's a significant difference in monthly payment and how much you will actually pay for your home. A 4.5% interest rate, after a 20% down payment will save you $147 on your monthly payment compared to a 5.5% interest rate. Could you use an extra $147 per month?
The 1% difference breaks down as follows:
- A savings of nearly $2,400 in the first year alone
- Over $34,000 saved over 15 years
- Nearly $53,000 savings over a 30-year term
The savings is significant for sure. Many people could use the extra $147 every month for many different things. Imagine what you could do with this savings.
Making Sure you Get the Best Deal Possible
Before you start shopping for your new home, it's a good idea to get a pre-approval for a mortgage. This gives you buying power and a price range for your new Nashville home. However, the first pre-approval you receive may not be the best deal.
Shopping your pre-approved mortgage is a good idea. Sometimes, you can tell a second mortgage company what interest rate you are getting from the first and they will beat it. Don't be afraid to negotiate for the best possible deal before you buy your new home.
The Ashton Real Estate Group of RE/MAX Advantage
The #1 Real Estate Team in Tennessee and #2 RE/MAX team in the World!