Mortgage & Finance

For some owning a house is a short-term kind of thing. When a mortgage is involved short term home ownership is a win for lenders. The interest on mortgages is front-loaded making interest payments the highest in the first month.

In fact, on a 7% 30-year mortgage with a 10% downpayment, it takes about 20 years before the monthly interest payment is lower than the monthly principal payment.

If the house is sold during the first five years of the mortgage the lender makes a lot of money. If someone else buys the house and gives a 30-year mortgage the lender makes even more money.

I support home ownership wholeheartedly but I often discourage home buyers who believe they will need to sell in a few years. Homeownership, or should I say mortgage ownership is more of a long-term kind of thing.

Yes, interest rates matter.  In the example above the borrower pays over 76,000 in interest during the first five years and $13,203 in principle. Sure home prices are rising and the buyer will have some equity after five years but they also had closing costs on the loan, a down payment and there will be closing costs and other expenses related to selling the house.

The 30-year fixed-rate mortgage averaged 7.09% as of Aug. 17, according to new data from Freddie Mac’s  Primary Mortgage Market Survey. Last week, this mortgage averaged 6.96%, while one year ago it averaged 5.13%. The current level is the highest in more than 20 years.

Some have suggested that there may be yet another rate hike this year. I sure hope not. So far higher interest rates have not discouraged home buyers as much as home sellers who are staying put.

I mostly only write about mortgage interest rates when they are high or low. Last week they went up. I would call them high at close to 7%. The rates don’t seem to be slowing home sales down. probably because there are more buyers than there are houses on the market. Home prices remain high and are still rising.

 

 

 

Mortgage interest rates rose last week and are hovering around 7%. I’ll update this post later today when Freddie Mac posts the average rates for the week.  The demand for mortgages is at a three-month low.

Rates will likely go down again but only if the US debt ceiling is increased. If not look for mortgage rates closer to 8% and more.

This might be the best time to hold off on buying a house unless you can pay cash.

As for selling a house, they are still selling quickly and often with multiple offers. Cash offers are fairly common this year.

 

Here are the updated weekly mortgage rate averages.