PMC Mortgage Lender's Blog

Mortgage interest rates have fallen this year to historical lows and with them so have the costs of home ownership.

Regardless of a borrower's loan amount, bargain-basement interest rates have brought a home buyer’s monthly mortgage payment down to levels never seen in history.

Because of the current, low-rate environment, it's a great time to buy a home. It's an even better time to refinance.

For any home buyer considering the purchase of a home, mortgage financing is the largest part of their "total cost of home ownership." The higher their mortgage interest rate, the more interest they'll pay over time.

As mortgage rates have fallen, a borrower’s long-term interest costs have also plunged. Consider this example:

April 2011: A new $300,000, 30-year fixed-rate mortgage will accrue $276,000 in interest.

August 2011: A new $300,000, 30-year fixed-rate mortgage will accrue $227,000 in interest.

Buyers who purchase a new home at today's current rates will pay 18% less mortgage interest over the term of their loan as compared to those who purchased a home six months ago in April.

In the example above, what homeowner wouldn't seriously consider saving $49,000 in interest by buying now? It's the most compelling inducement this year to buy a home while rates are low.

The interest cost savings are greater when the comparison is made to loans from 2009 and 2010.

While the fear of continued falling prices may drive some buyers to postpone their home purchase, current mortgage rates are so low that locking them in will likely offset any price declines.

Consider the buyer who decides not to buy a home this year and waits to see if house prices will drop another 10%. What if rates start to climb?

Experts say if the interest rate increases by just one percentage point, all of the borrower's 10% price savings will be quickly erased due to the higher interest charges. In fact, your monthly mortgage payment will also be higher.

Waiting to purchase a 10% less expensive home in this scenario would actually cost the borrower more money in the long term.