so obviously when it comes to mortgage rates on homes specifically we're talking about very
long loans here typically about 15 to 30 years most of us being on the 30-year end
and so when you're talking about an interest rate being lowered for that long of a loan
you can save a ton of money and interest and that's great if you already own a home
because typically you can just refinance your mortgage and you can save a ton of money
and most of the time when interest rates go lower housing prices go up so at the same
time if you already own a home you're getting more equity in your home because the value is going up
and if your interest rate goes down then you're saving more money on interest but specifically to
the people who are looking to get into a home who don't currently have a mortgage this video is for
you because there is something you have to know about mortgages when it comes to interest rates
being a little too low and the housing prices being a little too high so honestly in my personal
opinion i don't have a problem with lower interest rates because if you've got a mortgage a car a
boat whatever the loan if you lower that interest rate you're typically going to save a lot of money
in interest which just means more money in your wallet to spend on whatever the heck you want
but the point here is that specifically in the housing market if you're looking to buy a home and
the home price is up here because mortgage rates are down here in theory you might think you're
getting a really good value because you can afford the monthly payment but when you look at the math
side of things it's not as good of a value and that's the point that i want to make here okay so
let's say that you go out and buy a four hundred thousand dollar home at five percent interest on
a 30-year term well your monthly mortgage payment is going to be about 2 150 bucks and that's not
including taxes or anything like that that's just the base interest and principal now let's
pretend that the interest rates go lower quite a bit lower all the way down to 3.5 percent and
this causes home prices to go up so now let's say that the same house is going to cost you 500 000
at three and a half percent interest rate for 30 years well now your payment is going to be almost
the same it's going to be about 2 250 bucks so 100 bucks more per month but the difference is
is what it's going to cost you overall after the 30-year term is complete because overall
on the four hundred thousand dollar home when everything's said and done you're going to pay
about seven hundred and seventy three thousand dollars in total that's including buying the home
and paying all the interest and then with the five hundred thousand dollar home you're gonna
end up paying a total of eight hundred and three thousand dollars including interest
and the price that you paid for the home which was a hundred thousand dollars more so overall
eight hundred and three thousand dollars versus seven hundred and seventy three 000 is a 35 000
swing so overall the 500 000 home in this math equation was 35 000 more expensive overall even
though you had the lower interest rate so in this equation not only are you going to pay a hundred
dollars more per month for an entire 30 years just for that 500 000 home you're also not considering
the fact that you are probably going to pay more in property taxes as well because the higher the
home value the higher the property taxes so just keep that in mind as well because a lot of that
kind of stuff you're not going to see on paper because nobody really knows what's going to happen
to property taxes but we can only assume that they are going to go up over time and they are
definitely going to go up when the home prices go up as well so in theory even though you have lower
interest rates if you do have a higher home price a lot of the time the overall cost can be more
when you're done with the entire term of the loan but all of this has to do with the math so all
you have to do is just get a loan calculator plug in the numbers yourself and see if it's
going to be a better value or not based on your particular situation because a lot of the times
the numbers can go the other way but it really just depends on your specific situation now if
you just happen to find this channel i'm jason with honest finance and i make a lot of videos
on different topics that'll give your life and your finances more value so if you did get some
value out of this particular video feel free to subscribe but thanks for watching have a great day