Certified financial planner Wes Moss provides personal finance advice and accessible investment strategies. His guest post appears here weekly.
One secret to financial success is mastering what I call “market jujitsu” — the art of taking advantage of what might be considered a negative situation. For example, if you have significant amounts of money stashed in bonds and money market funds, you’re probably sick and tired of our historically low interest rates. But on the flip side, if you’re also in the market to buy a home, you can put these low rates to work for you by making your move now.
Mortgage seekers are finding 30-year fixed rates as low as 3.75 percent and 15- year loans under 3 percent. Rates haven’t been this low since the 1950s! Couple those rates with signs that home prices are stabilizing both nationally and locally, and it’s time to either buy a new home or refinance your current abode.
Notice that I say it’s time to buy a “home,” not a “house.” A home is a place you intend to live for several years – maybe the rest of your days. Buying a house you intend to flip or convert to a rental is a different conversation for a different column.
When you go mortgage shopping, remember the current rates make 15-year mortgages a realistic option for many homeowners. According to one of my go-to mortgage contacts, Mike Ivey of Capital City Mortgage Corporation, a typical $300,000 30-year fixed rate mortgage at 3.75 percent might come with a monthly payment of $1,389 and a total of $201,8932 in interest paid over the life of the loan. A 15-year fixed-rate mortgage at 2.99 percent for the same amount will carry a monthly payment of $2,070 – but you’ll pay just $74,287 in interest. In this scenario, the 15-year mortgage saves the borrower $127,605.
Of course, the 15-year option takes an $8,172 bite out of the family’s annual budget. But – and here’s some more jujitsu – that $8,172 per year helps buy some future financial freedom. Imagine how much money you could pour into your retirement accounts if your house was paid off while you were still in the middle of your prime earning years!
I know you’re busy and that applying for a loan can be a colossal pain. But take advantage of these rates before they are gone — never to be seen again in our lifetime.
If you’re happy with your current home and plan to stay there, look to re-finance to a 15-year loan. If you aren’t thrilled with your current place and plan to be in the Atlanta area for at least five years, now is the time to buy a first home or trade up to one that better suits your needs.
– By Wes Moss, for Atlanta Bargain Hunter