The Current Record Low Interest Rates Beat the Recent Tax-Credit Benefits!

Just a few months ago the buzz over first time home buying was the $8,000 government assisted tax-credit. However, with the current interest rates reaching record lows at 4.32%, the low interest rates are proving to be more of a money saver for buyers who are looking to lock in these rates for the long term.

Today’s homebuyers have a greater opportunity to save on interest over the long-term than those buyers that took advantage of the $8,000 homebuyer tax-credit. First-time homebuyers who purchased any kind of home—new or resale—were eligible for the tax-credit, which expired April 30, 2010. Here is a comparison of costs between a buyer taking advantage of the tax-credit and a buyer purchasing in mid August when the interest rates were 4.42%.

A qualified first time homebuyer purchasing a home for $200,000 with 20% down would have a loan amount of $160,000. At the time of the tax-credit for a 30-year fixed loan, interest rates fluctuated around 5.21%. Based on these rates the buyer’s monthly payment would be around $880 per month. After 30 years (the term of the loan), the buyer would have paid $156,644 in interest. A buyer electing to take advantage of the 4.42% interest rate in August, with the same loan term and 20% down payment would have a lower monthly payment at $803. At the end of the loan term, this buyer would have paid $129,119 in interest.

After recouping the $8,000 tax-credit (which was not received by the buyer in August), the buyer would have paid $19,525 less in interest over the 30-year loan term than the buyer receiving the tax-credit.

What does this tell us? Right now is an optimal time to buy a home.

“With interest rates at the lowest they’ve been in years, it’s a fantastic opportunity for consumers to realize the American Dream of owning a home,” said Chad Ochsner, Broker Owner of RE/MAX Alliance. Our associates are experienced in all types of real estate transactions including short sales, and with Colorado Mortgage Alliance (a Wells Fargo affiliate), we know we can help that dream come true.”

RE/MAX Alliance has the experience and necessary tools to assist buyers who are looking to take advantage of the lowest interest rates in 60 years. RE/MAX Alliance’s affiliation with Wells Fargo makes the loan process easy. With 21 offices and over 800 real estate professionals across the Front Range, RE/MAX Alliance is ready to serve you and your real estate needs.