In today’s Knoxville real estate and mortgage markets we are seeing affordability and purchasing power like no other time in history. When rates are at historical lows, as they are now, they expand the home buyers purchasing power. While home prices have been low as well, the ultimate factor to purchasing power in the Knoxville real estate market is low mortgage rates. A perfect example of this is the fact that home prices are up nationally from one year ago, yet affordability is better. Why? Low mortgage rates.
Within the last week, rates on a 30 year fixed mortgage saw a new all time low at 3.32%. A recent article by Dan Green, of Waterstone Mortgage stated, “Since 1971 — a span of more than 500 months — the 30-year fixed rate mortgage rate has averaged 8.75%. You can buy 81% more home in 2012 for the same monthly payment as compared to the average of the last 40 years. Even as compared to one year ago, home buyer purchasing power is higher by 9.7%.” Wow, 81%, now that is some difference in purchasing power!
The second surprising percentage comes when looking at the difference between a 15 year and 30 year mortgage. While the big news usually focuses on the 30 year rate, according to Freddie Mac’s most recent weekly mortgage rate survey, conforming 15-year fixed rate mortgage rates and conforming 30-year fixed rate mortgage rates are both at their lowest levels in history.
Green also shared the following statistics. For those home buyers or home owners that can handle the extra monthly payment that a 15 year mortgage entails, they have the ability to save 63% in mortgage interest costs when compared to a 30 year mortgage. Yes, you read that correctly, 63%! For example, a homeowner in Knoxville, TN using a 15 year fixed mortgage at the $417,000 conforming loan limit would pay $88,000 in mortgage interest over the life of the loan. Utilizing a 30 year mortgage, the same homeowner would pay $242,000. Nearly triple the amount!
Troy Stavros, Broker and Partner with the 865 Real Estate team stated, “Information like these two surprising percentages shared with us by Dan Green of Waterstone Mortgage, remind us how important it is to have trusted experts working for you. Going through the home buying process alone, thinking you know all the answers, is the surest way to get yourself into a heap of trouble. Seek out professional advice so you can make an educated decision. A home is a huge investment that you shouldn’t just cannonball into.”