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8 Mar

INTEREST RATES – 101

General

Posted by: Peter Paley

Getting the best interest rate is the most important aspect of getting a mortgage, right?

If you answered YES, this article was written just for you.

The rate is very important and this article is going to illustrate the math and savings one can achieve with using a mortgage professional.

Before we get into the math, we wanted to let you know that in our opinion that mortgage terms are just as, if not more important that the rate.   Pre-payment privileges, penalty calculations, portability and assumability to name a few.  Some low rate mortgages are not portable and have HUGE penalties.

So when comparing rates, please compare the features and terms.

Lets get into the math!!!  #MortgageNerdsLoveMath

The best part of our job is when we are able to save a client 0.50% on their mortgage rate or more.  It doesn’t happen all the time but there are time throughout the year when it does happen.  AND IT FEELS GREAT.

The first calculation I would like to give you is the month payment per $1000.00 of mortgage.   At the time of writing, our best 5 year fixed rate mortgage is 2.34%.  The cost per $1000 of mortgage is $4.40/$1000.  So if you wanted to quickly approximate the month mortgage payment of a $300,000 mortgage, all you have to do is multiply $4.40 x 300 = $1320/month.

Wow 2.34%? That’s amazing.  What if the rate was 0.50% higher or 2.84%?  The cost per $1000 would be $4.65/$1000 per month.  So 300 x 4.65 = $1395/month.

$75 may not seem like a lot of money but it sure adds up.  The interest savings alone is over $6900 over a 60 month or 5 year term.   Not only do you save on interest, but there is more principle paid with a lower rate.  In the above example your mortgage balance will be more than $2,500 less with a lower rate.

So what’s the best thing to do?

Watch our video and like it on YouTube and refer to our “Interest Rates – 101” handout by CLICKING HERE TO DOWNLOAD .  Please feel free to share with your clients or anyone you know looking for a mortgage.

Click the link below for our YouTube video!

If you have any clients looking for a mortgage pre-approval or mortgage advice please have them visit our website or call Peter at 204.227.2744.