Is a Lower Mortgage Rate or Bigger Down Payment Better?
Posted by Brian Sims on Thursday, October 13th, 2011 at 3:06pm.The question of whether to buy now while mortgage rates are down or wait until you have a bigger down payment, is one that is raised quite often. First time home buyers are particularly curious about this dilemma because they are less familiar with the process and often have less saved up to put down.
Each case is a little different but in general, having a lower interest rate on your mortgage is more important than having a larger down payment. In fact, your monthly payment could easily be less if you get a great rate and mortgage more.
Here's an example:
Mortgage rates for a 30 year fixed loan are close to 4% (actually slightly less today), which means your payment for a $250,000 house would be about $1,600 per month...if you made the minimum down payment for an FHA mortgage.
However, let's say you want to save up another $10,000 for a downpayment and interest rates rise to 5.25% (where they were earlier this year), your new monthly payment would be about $1,675. That means you would have a monthly payment of $75 more, even after waiting and saving the extra cash.
Moral of the story? Buy now while mortgage rates are at historic lows to save money now and later. If you're on the fence or ready to buy but need some professional advice, please feel free to give me a call at 678-739-8686. I would love to answer your questions and help you find a great deal on a home in Smyrna, Vinings, or Atlanta.
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