How Much Can You Really Save With The Low Rates?

“I KEEP HEARING ABOUT HOW THE INTEREST RATES ARE AT AN ALL-TIME LOW, BUT IN TERMS OF A DOLLAR AMOUNT, HOW MUCH MONEY CAN I REALLY SAVE WITH THESE LOW RATES?”

The difference between interest rates today and yesterday or last week may not be that significant, but if you look at the broader picture, you’ll see just how much money you can save over the life of the loan with these record-low rates. For example, let’s look at the interest rates from two dates in 2010: April 8 and November 1—seven month apart. On April 8, the national average interest rate on a 30-year fixed-rate mortgage was right around 5.20 percent, while on November 1, the average was approximately 4.25 percent. For a 30-year fixed-rate mortgage of $250,000 at the April 8 rate of 5.20 percent, the total cost (not including points or fees) to repay the loan would be $494,000. In comparison, the total cost to repay the same 30-year fixed-rate mortgage of $250,000 at the November 1 rate of 4.25 percent would be $443,000. That’s a savings of $51,000 over the life of the loan—just by getting an interest rate that is one percent lower. Of course, your ability to get a low interest rate will depend on the type of loan you’re getting and your current credit standing, but with today’s record-low rates, your savings could be quite dramatic. ∆