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2011-10-04 09:52:32
Historic Low Interest Rates holding steady!

Mortgage interest rates are holding steady at their historical lows!!

Current Mortgage Interest Rates Utah

Current rates as quoted by Mike Christensen with Lexington Mortgage are:

30 year FHA - 3.75%

15 year Conventional - 3.25%

30 year Conventional - 3.875%

USDA Rural Development 3.75%


I am watching homes sell with very little down (and often 0% down) with monthly mortgage payments at an amount for much lower than the going rental rates for such units. It should be pointed out that it is MUCH CHEAPER to buy than rent right now for three different reasons:

1) Even if one's mortgage payment is the same as the going rate for rent, it needs to be remembered that a portion of your payments gets applied to principal.

2) The interest that you pay on your mortgage is tax deductable (any loan origination costs when purchasing a home are also tax deductable).

3) Right now, rental rates have greatly increased over the past two years while home prices and interest rates have dramatically decreased. So it is cheaper to own than rent right now. 


For example (all amounts are approximations and estimates), a $200,000 home can be purchased for very little or nothing down for between $1150 and $1250 per month (depending on the location and the loan). A similar home would probably rent for $100 to $300 more per month.


In addition, $250-$350 per month of the mortgage payment will be aplied to principal. So instead of paying $1400/month in rent, it is likely paying just $900/month in interest, taxes and insurance. 


At the end of the year, the $800/month or so in interest is tax deductable and depending on your situation, can save you thousands in taxes at the end of the year. So the $800/month is now $500 or $600 per month after spreading out the tax savings. So annually, the cost of home ownership is around $7,000, while the cost of renting is nearly $17,000. That is a savings of almost $10,000 EACH YEAR; and the longer you pay on the mortgage, the greater the amount of your payment is applied to principal. So by year 5, instead of $300/month going to principal, it is now $400/month. 

This is why IT IS A GREAT TIME TO:


2) Upgrade to a larger home (any lose in your current home will be more than saved in the upgrade)

3) Purchase an investment property (Rental rates are high enough to cover expenses and mortgage payments on most units) 


Right now, new construction is turning into an amazing option for home buyers as many builders have set up systems for simple and cost-effective semi-custom home building. This is what my wife and I are planning to do this Spring. If interested, I work very closely with one new construction agent and have worked with a few others that have very much impressed me. If you want to buy but just can't find what you are looking for, I highly recommend you give this option a more serious look. 


KSL.com has also reported that refinaincing applications are surprisingly low considering the historical low interest rates. I have had many friends and past clients tell me that they looked into refinancing but were told that they wouldn't be able to. I was told the same thing by one lender but then spoke to Mike Christensen with Lexington Mortgage about it. They were able to streamline our refinance and drop our rate from a 5.5% interest only with a 5 year arm, to a 4.25% fixed 30 year rate. It hardly cost any closing costs and in less than a year should have already made up the extra costs to get that rate. I highly recommend that you give Mike Christensen a call if you are looking to refinance as he has been able to help out several of my clients who were denied elsewhere. His contact info is:

Mike Christensen
Lexington Mortgage
1945 North 1120 West
Provo, Utah 84604
Phone: 801-373-5944


Here is the article from KSL.com: http://www.ksl.com/?nid=960&sid=17487812

As always, for all your real estate needs, in Utah or beyond, let me know what I can do to be of assistance! Have a great day!

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