Since last year, mortgage interest rates have been consistently dropping below 4% for the regular types of loans based on the data gathered by Freddie Mac. Economy experts say that in 2020, it will settle steadily around 3.7% and 3.2% for 30-year and 15-year fixed-rate mortgages respectively—which are the most recommended type of mortgages.
However, there is still no guarantee that things predicted by the experts will surely happen because there are other factors in the markets that play vital parts of the game—like tariffs and trade wars—which can cause a significant shift in things. These factors may lead to the Federal Reserve increasing interest rates gradually so as to equilibrate things out in the market and prevent a destructive crash.
You can always opt to talk to someone knowledgeable about mortgages and financing should you have questions and doubts. It is important that all your worries are answered and eliminated before you jump into decisions that put you in a not so good position.
- What’s in it for the sellers?
Low interest rates mean more potential buyers would be inquiring buying your home and they may just become more determined to buy it sooner. But you have to keep a keen eye on the market trend because if interest rates are going to increase later this year, it would be a better option to keep your property in the market for a little while. Higher interest rates will make buyers careful in their buying options. Mortgage is a big deal, it is a commitment that is not to end on a short-term. That is why, if interest rates go high, buyers will tend to take a pause for a need to reassess their preferences and options.
What you can do is be attentive to the market and be patient. A real estate agent can certainly help set your expectations on how long you need to wait for the right offer to come and how much profit you can possibly make. Waiting can be painful but impatience will not do you any good, so it is always best that you get advice from a professional in the business to save you from your worries and keep you at ease.
- What’s in it for the buyers?
Now, even if the interest rates are low, if you are not going to buy a property in cash, it would be smarter to go for a 15-year fixed mortgage rate.
The advantages of 15-year fixed rate mortgage
- This kind of mortgage has lower interest and allows you to pay for the principal amount faster than that of a 30-year conventional mortgage.
- In the long run, you can definitely save more in this type of mortgage because you pay a lot less interest over the life of your loan.
- Choosing this lower interest fixed rate mortgage on top of the already low interest market trend is always the best thing to do.
- This type of loan could actually save you thousands of dollars in interest or even tens or hundreds of thousands of dollars interest rates.
- And the best part is that, you get to fully own the property in half the time compared to the conventional mortgage for 30 years.
The disadvantages of 15-year fixed rate mortgage
- The 15-year fixed-rate mortgage monthly payment would be about 50% higher than the 30-year conventional loan.
- When opting to this type of mortgage, you should be financially ready since this requires higher monthly payment.
- If you jump into this kind of loan without readying yourself, your other needs and bills may get compromised.
- Your income’s stability is also something you have to consider if you get this loan.
- Moreover, you have to be realistic with your plans because again, mortgage is a big deal of a commitment.
- Also, with the 15-year fixed rate mortgage, you would most likely not qualify for a more expensive property and settle with one that is realistically payable on a monthly basis, unless you can really afford an expensive home—which in that case, you may want to just buy with cash instead.