What is the American Dream? To have a family, a solid career, and a beautiful home. A little slice of land, a place to watch your children grow up, someplace you can put down roots. Right now, with interest rates as low as they are, you’ve never had a better opportunity to buy your piece of the American Dream, a home all your own.
Interest rates are a tricky thing and unless you’re a financial whiz, you’re going to have a hard time following why interest rates are low or high. Let’s just say this, mortgage rates are tied to the Federal Reserve Bank, who adjust the interest rates based on mortgage-backed securities. We could talk all day about that specifically, but you’re not interested in that, you want to know why you should buy a home right now!
Because the interest rates are at historical lows and you can get more home for your money right now! Interest rates aren’t anything tricky. It’s just like buying a car or having a credit card. There is interest charged on the loan and each month part of your mortgage payment goes to the principal and part goes to the interest. Just like with cars or credit cards, the lower the interest rate, the more buying power you have without technically wasting money on interest.
Interest is the profitable end of a loan. In theory, when someone gives you more money than you have i.e. they loan it to you, they’re hoping that you make them that money back, with a little extra for the risk they took giving you this money. After all, you don’t have two hundred thousand dollars (or whatever figure you’re applying to get) just laying around. If you did, you wouldn’t need a loan. This knowledge carries with it an inherent risk that you won’t be able to pay back the loan. So interest is charged in order to ensure they get their initial investment back.
When interest rates are low, it shows confidence in the consumer. The market believes that you will pay your debt due to low unemployment, growing economy, etc…. The investment they are making is not seen to be as risky, so they don’t mind losing some profits on you, the individual, because they are banking on a lot more people entering the market and being able to pay back the loan.
We’ve hinted at this several times but now we’re going to say it and explain it outright, low interest rates mean more bang for your buck. You only have a certain amount that you’re willing to spend on a mortgage each month. With interest rates low, it means you won’t have as much money going towards interest each month out of your mortgage payment, which in turn means you can get a larger loan. Oftentimes a larger loan means more house, more land, or new house with updated technology. Either way, with interest rates so low, it means your dollar will go further each month.
However, the flip side is that interest rates can change quickly and you need to talk to a realtor, like the professionals at the Lugo Group, to ensure you’re buying at the best time, for the best price to ensure that you are truly able to enjoy your piece of the American Dream.