How Interest Rates Affect the Bottom Line!

Filed Under Finance, Investment real estate, Pricing, buying or selling a home, buying or selling a home in Portland Oregon, mortgages · Tagged: , , , ,  

Did you know that a ½% change in interest is approximately equal to a 5% change in sales price? It’s powerful to realize the importance of the relationship of interest rates to your monthly payments.  This is the reason why our present low interest rates are so important!!  When I started my real estate professional life, interest rates were at 13% and when they dropped below 10%, we thought we’d just won the lottery!!!  So, our historic low interest rates coupled with the present market reality of decreased pricing is a serious reason to consider real estate as an investment!!!

Change in Interest vs. Reduced Sales Price

Purchase Price 

 $200,000

Interest Rate 

 5%

Term 

 30

Payment 

 $1,073.64
           

½% Increase in Rate 

 $1,135.58

5% Increase in Price 

 $1,127.33

A ½% change in interest rates is approximately equal to 5% change in price

 

1% Increase in Rate 

 $1,199.10

10% Increase in Price 

 $1,181.01

A 1% change in interest rates is approximately equal to 10% change in price

December 1, 2009 by jackson : No Comments

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