With lower interest rates holding steady, many homeowners are wondering if they should sell their home and buy up, or refinance their homes.
Holland Realtor, Larry Kleinheksel lays down some figures to help you decide.
“Are you contemplating selling because you are interested in purchasing a new home? If you answered YES to that question, then I say go for it.
Let’s look at the facts: If you purchased your home more than two years ago and have not refinanced, your interest rate is most likely in excess of 5 percent- maybe even closer to 6 percent. With interest rates dipping below 4 percent right now, that amounts to a huge savings. In fact, on a $200,000 loan with an interest rate of 5.5 percent, your monthly payment would be $1,135 and you would pay $208,808 in interest over the life of the loan.
Compare that with a $200,000 loan with a 4.0 percent interest rate, which has payments of $954 per month and a total interest payout over the life of the loan of $143,739. That is a savings of $181 per month and over $65,000 in interest’s savings over the life of the loan for the exact same price house.
Let’s take that a step further. A $200,000 loan two years ago would have gotten you a nice home here in Holland, MI. Today, that same $200,000 would buy you about 10-15 percent more home, and by that I mean more square footage, nicer amenities, bigger yard, etc. So now, for less money per month due to the lower interest rates, and falling market prices, you end up with a much better house for a lot less money.
So, you have a home to sell; now for those of you who purchased a home at the very peak of the market, which I am guestimating is about summer of 2006, the hard fact of the matter is that your home is worth less now than what you paid for it then. If you don’t need to sell, I would look into refinancing to lower your monthly payments, then wait it out…”