Buying Power Grows as Interest Rates Shrink

If there is one thing you have likely heard throughout 2020 and into 2021 it’s that interest rates on mortgages are historically low. But what does that mean exactly? If you have been thinking about purchasing a home, or refinancing your current home then your buying power is strengthened the lower the interest rate is on new mortgages. Just to see how rare interest rates being this low really is, you can take a look at the graph below, which charts mortgage interest rates going back to 1972.

It seems as though 15-year mortgages are following suit, with interest rates either tracking with, or falling below that of 30-year mortgages.

Buying power in real estate simply means, “Financial ability and soundness of a business or individual to afford the purchase of property”. Taking that into account, the lower the interest rate on a new mortgage the higher your ability is as a buyer to afford the purchase of a property. The graph below shows a nice breakdown of buying power based on a set of interest rates as well as an estimate of monthly payments.

If you are interested in making your dream of buying a home on Maui a reality, the Smith Team would love to help you put the pieces together. Here are the 4 areas you can start working on today, to prepare for home ownership in the near future.

Photo by Tierra Mallorca on Unsplash

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