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  • Writer's pictureBeth Campbell

Interest Rates Have You Bugged?

Many home buyers determine if/when to purchase a home based on whatever the current interest rate is. Historically in the last forty years, interest rates have fluctuated between 5% to 8%. The “going” rate is determined not only by the mortgage lending market, but also according to your credit scores and many times, your down payment. IF interest rates go down and your credit scores and/or income have stayed steady or risen and if the home has appreciated in value, refinancing is an option. However, there IS a cost involved, depending on the lender and the above-named factors! The lender “rolls” those costs into the end-result refinanced loan, so watch those carefully when deciding on a lender.

To put this in perspective, I’ve done the math! On a $150,000 mortgage for 30 years at 7% interest, the payment would be $998 a month (principal & interest only). IF you apply $51 more per month, your effective interest rate would be 6.5% and your loan would be paid off 52 months early. IF you apply $103 more per month, your effective interest rate would be 6% and your loan would be paid off 89 months earlier!

If your loan has escrow expenses included in the payment (taxes, insurance, etc.), make sure to factor in those costs (and estimated increases) when determining how much extra to put on your loan monthly, quarterly or yearly. There’s a trick to figuring all of this out! We started with a 6.5% interest rate, refinanced after five years to a 4.25% interest rate, and then started throwing extra money on it. I designed a spreadsheet that tracked our mortgage monthly. It showed the current balance, monthly interest, the escrow payment, the principal amount and the new balance owed. I double-checked the amounts each month with my mortgage statement to make sure it was accurate, and watched our balance go down! I could see each month when it would be paid off. Each extra dollar paid moved that date closer and closer. I’ve always been the “accountant” of our personal finances and had a goal in mind, unbeknownst to my husband. I threw every dime I could on our

mortgage and watched my spreadsheet carefully! What started out as a 30 year loan essentially was paid off in 15 year and 4 months. Finally, on our 35th wedding anniversary, I gifted him with a paid off farm! I couldn’t think of a better gift!

My message is DON’T wait to buy that house! Houses generally appreciate and interest rates will most likely stabilize to more palatable levels! Don’t wait for them to become 2-3% again, as those levels were NEVER seen before, at least in my lifetime. IF you are interested in having a spreadsheet designed to help you track your mortgage goals or potential mortgage goals, give us a call at 330-871-8235 or email me at! We’re always here to help YOU become a successful homeowner!

Published in Louisville Neighbors 07/2024

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