Damn, You're Young...

By
Real Estate Mortgage Broker with Mortgage Financial Group, Inc

I am stealing that line from Neil Cavuto of Fox Business Network

In a recent broadcast of Fox News, Cavuto mentioned how someone asked him about mortgage rates. The person was hesitant to buy a new house because mortgage rates went back up. Cavuto asked him what he was going to do... wait to see if they go back down was the response.

Cavuto, in his off tangent thinking, begins to share how "Damn" young this guy is. But his answer to the potential home buyer was "5.25% is pretty good." Then he proceeded to tell the young man to "Shut up."

Why did Cavuto tell him to shut up? The answer is pretty simple. "5.25% is pretty good." Remember when mortgage rates were double digits. Remember when prime was over 20%. Remember when...

Most people, if they think hard enough, will remember those days. Now, doesn't 5.25% or even 5.75% sound "pretty good." Yes, it does. And yes, 4.75% sounds better. Unfortunately, those days are in the past, and soon you will be saying I remember when rates were 4.75%. For those of you who waited to see if rates would go any lower, are now going to say, I remember when rates were 4.75%, but all I got was a 5.75% rate. But you know what? That is still "pretty good" compared to what it could be.

So what is the moral of this story? It is shut up about the rates. They are going to be what they are. It is only a matter of how long does a borrower want to wait to lock in their rate. 4.75% is gone. 5%+ is in. It is still a "pretty good" rate.

Oh, and to put this into monetary terms, a $150,000 mortgage at 4.5% over 30 years has a payment of $706. The same mortgage at 5.25% has a payment of $828. That is roughly $36 per .25% increase to the rate. That breaks down to just over $1 per day per .25% increase to the rate. Can you afford an extra $1 per day to go to your mortgage if rates went up .25% tomorrow. If the answer is "No," then you need to do something today. If the answer is "Yes," then can you afford a full 1% increase (or $4/day)?

Each day you spend watching the rates go up is just another dollar that you could have been saving.

If you want to watch the Cavuto news clip, click here.

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Topic:
Mortgage / Finance
Groups:
All Things Florida
Mortgages
Tags:
mortgages
interest rates
loans

Comments 72 New Comment

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Rainmaker
261,336
Kim Daugherty
d + b real estate, McKinney, TX REALTOR Broker/Owner
www.RealFamilyRealEstate.com

Jason - very timely reminder. We get greedy when we see these low rates and take for granted that they will be around forever. Cavuto has a way with words doesn't he?

June 10, 2009 03:42 PM
Ambassador
485,955
Donna Bigda
Greater New Haven CT Real Estate
RE/MAX Alliance

Jason - You hit the nail on the head with this post.  Congrats on the feature!  This is a great read for any buyer who is out there still sitting on the fence.

June 10, 2009 09:02 PM
Rainmaker
197,630
Mark Velasco
Friendly Hills Homes for Sale - Whittier, Ca. Real Estate - Listings
Realty Source, Inc (Luxury Homes Division)

Well said Jason. People don't realize how low (historically) the rates are right now.

June 11, 2009 09:29 PM
Rainer
34,550
Kenneth Young
Uni International LLC

Looking at the posts, alot of us remember the high interest rates.   Me, 1981 first house, VA approved, $10,000 down....interest rate:  12.5%

June 13, 2009 01:33 PM
Rainmaker
971,016
Sharon Alters
Your Fleming Island Relocation Agents.
Coldwell Banker Vanguard Realty

Jason, we were thrilled when we bought our first home and it was 7%. People are spoiled today by the last few years of low rates. Better take advantage of the rates we have now because they aren't going to stay here.

Sharon

July 04, 2009 12:17 PM
Anonymous
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Rainer
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Jason Price

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