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When the government took control of mortgage giants Fannie Mae and Freddie Mac this past week, a funny thing happened. The financial markets liked the move.

They liked it so much, in fact, that they all responded positively. Wall Street saw a rise in activity in the stock exchange, with pretty much the same results across most financial markets in the U.S. This resulted in many things, one being a sudden and sharp drop in mortgage rates.

Lower mortgage rates mean good news for housing consumers

Many mortgage rates have dropped around 1% (sometimes more) this week and that truly is good news for anyone wanting to purchase a home or refinance their current mortgage. Some may think a 1% lower mortgage rate is no big deal, but check out some numbers.

Let’s check some mortgage rate math and arithmetic

Let’s start with a typical American mortgage of $250,000. Assuming some basic factors, such as good credit and a down payment, a normal payment on a 30-year fixed-rate mortgage with a 7% mortgage rate would be around $1,664 a month. That same mortgage of $250,000 at a 6% mortgage rate would be $1,499 a month.

Taking the lower rate and looking at it over time, one could potentially pay $19,800 less in mortgage payments if they kept their mortgage for 10 years. The difference in payments between a 7% and a 6% mortgage rate over 30 years is a staggering $59,400 on a $250,000 mortgage. That’s a nice difference that any mortgage client can appreciate.

Lower housing prices mean more good news for home buyers

The lower rates are great for anyone considering a mortgage refinance, no question on that. Anyone with an adjusting ARM should take action now before the low fixed mortgage rates potentially rise. Waiting could mean missing out on the lowest payments in month.

But the best opportunity, probably one of the best opportunities in decades, is for anyone looking to buy a home – especially first-time home buyers. Low housing prices – coupled with the low mortgage rates, have created almost a perfect storm for home buyers. Anyone buying a home, even investment properties, will find deals they would have considered impossible just a year or so ago. It’s a pretty simple concept. Home buyers can get more house now than they could have for the same mortgage amount before housing prices dropped, and with a lower mortgage rate, they’ll get a much lower payment.

“I’ve been a renter my entire life and now is the time to buy. I’ve waited long enough,” said Michael Kroll, an adjunct college professor from Detroit. “I’ve always assumed I couldn’t afford the home I actually wanted and renting seemed to be a better, and cheaper, option. With what’s going on with prices and rates right now, renting doesn’t make any sense. I’m buying a house as soon as I can.”

Act now to get a lower mortgage rate

Waiting could cost you money. It’s that simple. If you aren’t sure where to start, get in touch with a real estate or mortgage professional as soon as possible. The old saying – “there’s no time like now” – couldn’t be more appropriate if you are considering refinancing or buying a home. Procrastination today could be costly tomorrow.

Related Info

• Find out just how low mortgage rates have gone today.
• Get started buying a home.
• Find out if you can lower your payment with a refinance.

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