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06 May . 2020

Ask an agent about today’s record low interest rates

These are understandably uncertain economic times, but for homebuyers with the ability to invest in a new home, mortgage interest rates have never been lower. Ever.

The bottom line: you can own a new home with a lower monthly payment, or you could qualify for a larger home than you could afford at a higher interest rate. Or both.

Ask an agent

We’ll explore the benefits of lower mortgage interest rates below, but if you’re in a hurry, here’s our best advice: Ask a professional real estate agent.

If you’ve bought a home before, you most likely know the value an agent brings to the home buying process.

If this is your first time to buy a new home, the first thing to know is that using a professional real estate agent doesn’t cost you anything. Their commission is paid by the homebuilder, and all of our builders at Sweetwater warmly welcome real estate agents and their clients. Actually, using a real estate agent could save you time, money and potential buyer’s remorse, by expertly helping you navigate the potentially overwhelming process of finding and financing the perfect new home.

Now, some numbers

The average interest rate for a 30-year fixed-rate mortgage with a conforming balance of $510,400 or less decreased to 3.43% in late April, according to the Mortgage Bankers Association. Interest rates are constantly fluctuating, and the interest rate you are able to get depends on factors such as your credit score, the price of the home, etc. Again, our best advice is to ask your real estate agent.

For a quick example of the purchasing power of lower rates, we used our mortgage calculator to compare the monthly principal and interest (P&I) payment on a 30-year mortgage for a home valued at $385,000, assuming a 20% down payment.*

At today’s average rate of 3.43%, our mortgage calculator estimates a monthly P&I payment of $1,371.

Just a one-point difference, at 4.43%, raises the monthly P&I payment to $1,547. That’s a monthly increase of $176. Over the life of the 30-year loan, you would pay an additional $63,932 just in extra interest.

*P&I is by far the largest part of a monthly mortgage payment, but the monthly payment also includes taxes and insurance. Hence, PITI is the acronym used for the total mortgage payment – Principal, Interest, Taxes & Insurance. However, P&I is a quick and easy way to get a general idea of the cost of purchasing a new home.

Three ways homebuyers can save

In March, Meyers Research crunched the numbers on today’s interest rates, which were already at historic lows, and have fallen even lower since.

Analyzing home value trends in Austin, Meyers broke out the potential savings for homebuyers in three different ways: 

  • Price cut equivalent. Today's low mortgage rates represent the equivalent of a major price cut for homebuyers across the U.S. In Austin, the price cut equivalent is $21,568.
  • Monthly payment difference. In major markets across the U.S., consumers are saving significant sums due to lower mortgage rates. In Austin, homebuyers can look to save an average of $103 a month on mortgage payments.
  • Monthly payment equivalent to past years. In some metro areas, including Austin, the change in mortgage rates is the equivalent of turning back time. When looking at today's home prices and mortgage rates compared to the respective data of prior years, Austin has hit a new level of affordability not seen since 2016.

Sweetwater offers new homes priced from the $300,000s to the more than $1 million, with a lifestyle that includes more than 700 acres of amenities such as the Sweetwater Club, the Overlook Club, Hilltop Park and miles of trails. Sweetwater is located along Highway 71, about 5 miles west of RR 620, in the highly regarded Lake Travis Independent School District