Debunking Interest Rate Myths Through Facts

There’s a lot of hype these days about interest rates climbing, but the truth is mortgage rates are the lowest they have been in decades. There is no need to panic—the housing market in Michigan is strong and getting stronger. Our high standard of living in Michigan is due to the fact that we only use 29% of our net income on housing. Compare that same stat to people in New York who use 49% or California who use 60% and you can see why Michigan is a very desirable place to raise a family.

Since mortgage interest rates are always a hot topic and everyone seems to think they know the “facts,” we thought we would give you a few facts from real professionals in the mortgage industry.

What Home Buyers Need to Know:

A mortgage rate jump from 4% to 4.5% adds only $60.00 to a monthly payment on an average $250,000 loan.*

Don’t always believe the advertised rate. Just because one institution quotes a rate of 4.5% and another promotes a 4.625% Annual Percentage Rate, doesn’t mean they are the same thing. You cannot assume that the first one is a better deal! An APR includes estimated fees and other charges which could include discount points. These discount points are paid directly to the lender at closing in exchange for a reduced interest rate, so you’ll need to ensure you are comparing apples to apples.

We get it, interest rates have been climbing and that’s scary, but they are still low and reasonable. When fixed-rate mortgages were first offered in 1971 they were around 7.5 percent, but in the 1980’s, they jumped to nearly 20 percent.

Mortgage rates are not stable. The same way stocks & bonds change, for good or bad, rates do as well. Both are subject to the same market forces.

Many lenders’ variable-rate mortgages don’t increase payments with a rise in interest rates; they just adjust the composition of what the mortgage holder is paying back—a little more interest, a little less principal.

30-Year Fixed Rates are the lowest they have been in decades:

Source: Freddie Mac

*Down payment and terms shown are for informational purposes only and are not intended as an advertisement or commitment to lend. Interest Rate for this example is based on an excellent credit score(750-850). Actual rate, annual percentage rate (APR) and other figures may vary.

Don’t always believe the advertised rate!