Lower mortgage rates aid homeowners, new buyers

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The 1.5 percent decline in mortgage interest rates during the past 12 months has created some exciting opportunities for first-time home buyers, rental property owners, and current homeowners in the first quarter of 2001. |ret||ret||tab|

If consumers were to watch interest rates on a daily basis, they would easily be lulled to sleep due to a lack of significant movement from one day to the next. |ret||ret||tab|

However, if someone purchased a home in March of 2000 and left the country for a year, he would be pleasantly surprised to have found that the same 30-year, fixed-rate mortgage at 8.5 percent has dropped to 6.875 percent. |ret||ret||tab|

Depending on the size of the home loan, this significant decrease in interest rates may equate to a savings of $75 to $300 on monthly mortgage payments. |ret||ret||tab|

First-time home buyers also are taking advantage of the lower cost of home mortgages. The same $75,000 home will cost first-time home buyers more than $85 per month less today than in March of last year. In addition, the decrease in interest rates has allowed some buyers to bump up the price range of homes for which they qualify. |ret||ret||tab|

A $600 principal and interest and payment last March, at 8.5 percent for 30 years, would result in a loan amount of $78,032. Today's 6.875 percent 30-year fixed rate will result in a loan amount of $91,334 based on the same $600 principal and interest payment. Thus, buyers have the opportunity of qualifying for a higher-priced home today, as compared to last year at this time. |ret||ret||tab|

Low down-payment programs in combination with lower interest rates have made it more attractive for renters to purchase a new home as well. We have several people who currently pay between $600 and $700 per month in rent who are using their federal tax refund to purchase a home in the $70,000 to $85,000 range with a resulting house payment of $585 to $700 per month. Thus, the "rent vs. buy" decision for many renters now becomes much clearer. Buyers should always consult with their tax adviser for possible tax advantages related to home ownership.|ret||ret||tab|

Many rental property owners have taken advantage of refinancing their current rental properties on 15- and 30-year fixed-rate notes. Rental property investors have traditionally utilized "in-house" bank loans, which only offered adjustable rate options for their rental properties. |ret||ret||tab|

Investors can now lock in their future cash flows and rates of return by obtaining fixed-rate financing. With fixed-rate investment property loans at the 7.25 percent to 7.75 percent level, cash flow opportunities become more apparent for people entering the rental property arena for the first time. |ret||ret||tab|

With the combination of low interest rates and a good supply of homes on the market right now, the Springfield area should have an outstanding year for new and existing home sales. This is a great time to buy! |ret||ret||tab|

Whether you are a first-time home buyer, looking to purchase rental property or sell your existing home and move up a level, interest rates at these low levels create exciting opportunities for everyone.|ret||ret||tab|

|bold_on|(Aaron R. Jernigan, is a vice president and manager of the mortgage department at The Bank in Springfield.)|ret||ret||tab|

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