Why Interest Rates Matter

    A couple mortgage shopping tips when you are ready to start looking to buy a new home in Columbus or Phenix City you will hear many different things about how a lower interest rate is the best interest rate for you when the price of a home is the same.  So let’s make this a simple mortgage process.  You are buying a new home in Columbus Georgia for $100,000 and have talked with your Realtor who recommended several local mortgage lenders.  You have narrowed it down to two and chosen the best mortgage lenders the first has offered you a mortgage with 3.5% APR 30 Year fixed rate with $2,000 origination fee and the second has offered 4.0% APR 30 Year fixed rate with no origination fee.  If we assume everything else is equal we can compare the two lenders offered mortgages.  With the first loan, you will pay $449 a month for 30 years for a total of $161,500 you also paid $2,000 in the origination fee so the total is $163,500.  With the second loan, you would pay $477 a month for a total of $171,850.  The difference in the 1/2 of a percent in interest rate over the 30 years for a $100,000 home in this example is $8,350.  The fact that the lender charting a lower interest rate wants a $2,000 fee does not come close to the amount of money you are saving in interest and why you should look for the best mortgage rate.

    The numbers are sometimes confusing when looking at an interest rate calculator but your lender should be able to provide you with all of this information so you can compare multiple lenders side by side.  It is also important to compare the services provided by the lender above the interest they are charging, not all lenders are the same and some of the best-rated mortgage companies charge more but provide better service.  An important thing to consider is finding someone local it is important that you find a mortgage broker near you.  Check out the “Finance” button at the top of the page to see a revolving list of our recommended lenders, or email us for a complete list of mortgage companies near you.

    Another tool you should ask your lender about is the option of purchasing “points” that will lower your interest rate in exchange for a lower down payment.  Will creditors lower interest rates?  This is a question for your financial advisor.  The best I can offer you is to be sure you know the terms of your loan agreement.  Are mortgage points a good idea?  It really depends on your specific situation and how much cash you have available at closing.  These mortgage points on your loan will save you money in the long run by paying more money up front and can be a good option for buyers who are willing to purchase a slightly more moderate home and use the difference in down payment.

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    One Response to “Why Interest Rates Matter”

    • FHA Loans | Real Estate in Columbus

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      […] Many new home buyers are not aware of the differences between the types of home loans that are available to them as they begin the process of looking to finance their new home.  This is troubling because a home purchase can be the largest investment for most families and it is important to be as informed as possible about all of your options before making a purchase.  While you consider the advantages of each type of loan keep in mind the costs of mortgage interest rates on the loan. […]


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