Why you should take advantage of the low mortgage rates

Let's assume that the rates for a 30 year amortization loan go from 5% to 6%. What will happen to your buying power?

At 5% you pay roughly $2,685 a month on Principe and Interest (P&I) payments for a $500,000 loan. If the rates to up to 6% you will only get a loan of $447,687 for the same monthly payments. This equals in a loss in your buying power of $52,313!

Now let's turn the same numbers around and look at how much more you would have to pay for a $500,000 loan over 30 years if the rates rise from 5% to 6%: At 5% your monthly P&I payments would be $2,685 and at 6% you would have to pay $2,998 a month for the same $500,000 loan which adds up to a whooping $112,910 over 30 years that you have to pay more!

Aren't these convincing arguments to buy now?

This blog entry is based on calculations done by a BofA Home Loans Team