Housing Affordability Only to Get Worse

With the recent mortgage rate increases purchasing a home has become less affordable. What this means is that a house you could purchase a couple of months ago is unaffordable today. In addition the affordability erosion is due to the recent appreciation of house prices. This newsletter covers how you still have an opportunity to take advantage of the historically low rates.

Looking further into the future, home prices are predicted to continue to keep rising at a moderate pace. In addition, as the economy recovers future salaries are also expected to increase. The main factor that is going to affect future affordability is mortgage interest rates. The expectation is that interest rates will increase another 0.50% by the end of 2010 and 2.5% higher in total over the next 2 to 3 years. Even with the recent increase in the mortgage rates, the rates are still considered being at historical lows. These historically low mortgage rates mean it is still a great time to purchase or refinance your home. The following example shows how you may not be able to afford your home if you wait any longer. Also it proves there is still opportunity to save on interest choosing to purchase or refinance a home in the near term rather than waiting until next year:

Example: $300,000 mortgage amortized over 35 years

Scenario 1: Current 5 year fixed closed interest rate 4.29%
Payment $1,374.08
Interest paid for entire term $61,690.85
Principle balance at end of term $279,246.05
Remaining amortization 30 years

Scenario 2: Predicted 5 year fixed closed interest rate at the end of 2010 of 4.79%
Payment $1,465.23
Interest paid for entire term $69,029.74
Principle balance at end of term $281,115.94
Remaining amortization 30 Years

From the example above you can see how the payments have increased by $91.15. This may not seem like much but it can actually lower the maximum mortgage you can qualify for substantially. This could mean that dream house you were hoping for may now be unaffordable if you wait until the end of the year to purchase. Not only could you afford more with the lower interest rates but there are two other great benefits as follows: 1) Interest savings of $7,338.89 over the 5 year term. 2) Lower principal balance that will save thousands in future interest.

So if you are looking to purchase a home or were thinking about refinancing, do not wait! You may no longer have the ability to afford your dream home or take advantage of the interest savings, if you do not act soon. Please contact us today to take your first step to purchase your new home.

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Any questions at all about mortgage financing please refer to our newly designed website at www.yourmortgagecontact.com or call us today. In addition please let your family and friends know about Your Mortgage Contact. We appreciate all referrals and everyone always receives personalized service. Please contact Betty at 403-532-3927, e-mail bsaskiw_prolink@telus.net, Kevin at 403-589-3021, kevsas@telus.net or at our updated website: www.yourmortgagecontact.com

Sincerely,

Betty Saskiw, AMP
Mortgage Associate

&

Kevin Saskiw, CFA
Mortgage Assistant