While thinking of a subject to write about this week I was perusing some of Michael Shapiro's old columns and came across one from between 1977 and 1978 about interest rates. He was writing that rates had just gone up a quarter point and how that was affecting money and that the quarter percent was equal to 18 cents per $1,000 on a 30 year loan; on a $300,000 loan that would be $54.00 more per month than it had been before the rates went up. And what were the interest rates at that time? For a fixed, 30 year mortgage with 20% down, the rate was a low of 9.25% to a high of 9.5%, with points from at about 1.5.
When I started to think about refinancing my own mortgage last summer I was offered an interest rate of about 4.30%, less than half of the 1977-78 rate! Since then rates have gone up almost half a percent. A $300,000 loan at a fixed 4.3% for 30 years would have a principal plus interest payment of $1,484.61; now, at the current average rate of 4.75%, the payment on that same loan would be $1,564.94, a difference of $80.33 each month. Rates are rising and you can see that even a little change can have a big effect on your pocketbook. Just think if you had that $300,000 loan at 1977-78 rates - your payment would be $2,468.03 per month at 9.25%, and $2,522.56 at 9.5%! Makes today's rates look mighty good, doesn't it?
Of course, you need to look at more than rates when shopping for a loan - there's points (which I found at three lenders ranged from .625 to 1.125 for the 4.75% rate), loan origination fees, appraisal fees and the amount required as a down payment. Also, how easy to work with is your lender? We've all heard horror stories about lenders who never answer there phones but simply put the caller through a series of automated answering systems. And will your lender be the right one for the particular property you are looking at purchasing? They all have their particulars about pest inspection results, well tests, septic tests, heating and cooling systems and so on. It's a good idea to know where your particular lender stands on such things so that you don't find yourself missing out on your dream property.