In today’s news there is a big piece of good news for American homeowners and/or prospective homeowners.
Freddie Mac is a US Government Sponsored company, a.k.a. enterprise, that purchases mortgages from banks and all sorts of lending institutions. Once Freddie Mac owns those mortgages, they put them together into Bundles that are sold to all sorts of investors who are obviously looking to make a profit on their transaction.
Since Freddie Mac is the largest corporation in the United States by total revenue, they wield immense power when it comes to Interest Rates.
Here’s the good news for you!
- Long Term mortgages, those that are 30 years in length and are on a Fixed Interest Rate interest rates continued to fall
- Currently a Freddie Mac loan is costing 4.07% this week
- The current rate is down from 4.10% last week.
- One Year Ago, the same mortgage was at 4.61%
As you can quickly see the interest rates are falling.
So, exactly what is Interest?
- Interest is the dollar amount that a bank charges to loan money
- Interest is the COST of money. On the surface that makes no sense but, it does! Just like buying a home there are many costs such as the plumber, carpenter, and electrician.
- Let’s pretend just for this conversation that you home cost you $100,000,at today’s interest rate of 4.07% you will pay the bank $174,553.75
- The Cost of your Money is therefore $74,553.75
So, what exactly is Interest?
- It is the cost of money, just like the plumber charging you $70 an hour.
- It costs money to borrow money.
The good news is that right now money is a relatively cheap commodity. Had you signed up for your mortgage last year when it was 4.61% the cost of your money would have gone up to $84,305.85 or $9,752.10 more. See why Interest Rates are so important!
What do you think? Call us at (802) 985-5855