Conventional Mortgage, General Real Estate

Low Mortgage Rates Make Denver Real Estate a Good Buy

If you are in the market to buy a house, this is the time to do it (actually November 2010 was the best time, but now is still good!). For potential homebuyers who qualify, mortgage rates are still near record lows, meaning hundreds of dollars of savings each month, thousands of dollars of savings every year, and tens of thousands of dollars in savings over the course of a 30-year, fixed-rate mortgage. This article will use Denver property value estimates to illustrate the immense savings potential available to homebuyers who purchase now.

When examining mortgage rates, it’s better to use actual home prices and figures, as they demonstrate the real saving (or costs) that small changes in interest rates entail. For example: the 30-year fixed mortgage rate fell to 4.17 percent in November 2010 to its lowest level ever (1), with rates currently still low, at 4.86 percent, and around 6.3 percent in October, 2007 (2). Those figures don’t seem that different, right? Just a couple of percentage points apart, nothing to look twice at.


But, in fact, these small changes in percentages mean big savings in the short term, and huge savings in the long term. Take for example Denver property: the average median home price for Denver real estate rose to $217,740 in June 2010, its ninth straight monthly increase (3); if someone were to purchase a Denver home for sale at the median price, the monthly payment on a 30-year mortgage would vary widely based on the interest rate.


Were homebuyers to purchase only two months ago, with interest rates at historic lows (4.17%), their average monthly payment would have been $1068.98. If they purchase now, with rates only ~0.7 percentage points higher (4.86%), their average monthly payments will be $1150.32 (4). The difference between the two payments is fairly large: more than an $81 increase in premiums every month, meaning more than $950 every year, and totaling more than $29,000 over the 30-year life of the loan.


But don’t kick yourself for not buying a few months ago. Just be sure to buy as soon as possible; if (or when) interest rates recover to more normal rates (and even the 2007 rate mentioned above and used for this calculation, 6.3 percent, is relatively low) an average monthly payment for a Denver home jumps to 1,347.75 per month. That means that even today’s relatively low interest rates can save you over $197 every month, over $2,350 every year, and more than $71,000 over the 30-year life of the loan when compared with more normal, historic rates (4)!


So the small changes in percentage points mean huge dividends in the Denver commercial property market as well as in all others across the nation. While average monthly rental payments may still be cheaper than average monthly mortgage payments, the ability to resell and gain back the value of your mortgage, as well as the thousands of dollars in annual tax deductions (5) that homeowners – not renters – can claim, make now one of the best times ever to purchase a home.