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Colorado Springs Real Estate Brokerage : Jeremy Isaac, Realtor

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How Important is the Interest Rate?

Published March 13, 2009 by Jeremy

So just how important is the interest rate when purchasing a new home? Let me put it to you this way, a $200,000 loan amortized over 30 years at 5% interest results in a monthly payment of $1,073.64.

Now reduce that loan to $195,000, but adjust the rate up to 5.25%, and that puts your monthly payment at $1,076.80.

That means a .25% change in interest rates is equivilent to a 2.5% change in home prices.  I still see people on the sidelines waiting for the market to “bottom out” (that is a topic for another day) – they would be better off trying to make sure they get the best possible interest rate and then buy while prices are still at 5 year lows!

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