Will mortgage rates fall to 3 % in the US ?
The 30 year fixed mortgage rates have fallen significantly over the past few days in the United States. When the mortgage rates fall, the owners responsible for the mortgage rates have an option to refinance the home that leads to a price that is more affordable to them.
Currently, the mortgage rate is around 5% for 30 years fixed mortgage.
I am thinking that the mortgage rates will fall to a lower rate and I am thinking in the range of 3% to 3.25 % for a 30 years fixed mortgage.
If the rates do fall, we will see a surge in refinancing of the existing mortgages and people may find that they can repay the mortgage and still have money that can be fed back into the economy thereby fuelling growth with respect to factors like the GDP (Gross Domestic Product).
I am thinking that this is one way to solve the mortgage crisis in the US.
The alternative way is to increase the number of payments of mortgages. As a result the duration of the mortgage is higher although the rate of the mortgage will be the same.
The net impact of the two options will be that the monthly mortgage will be more affordable to the average joe leading to extra dollars in the pocket, that may eventually flow back into the economy.
Scenario 1
Loan is 500,000 dollars
interest rate is 6 % ,30 year fixed
monthly payment would be 3519 dollars
total payment at end of 30 years would be 1,266,691 dollars.
Scenario 2
Loan is 500,000 dollars
interest rate is 3 % ,30 year fixed
monthly payment would be 2628 dollars
total payment at end of 30 years would be 946,388 dollars.
Scenario 3
Loan is 500,000 dollars
interest rate is 6 % ,50 year fixed
monthly payment would be 3152 dollars
total payment at end of 50 years would be 1,891,715 dollars.
Scenario 4
Loan is 500,000 dollars
interest rate is 3 % ,50 year fixed
monthly payment would be 2130 dollars
total payment at end of 50 years would be 1,278,433 dollars.
The four scenarios are just mere examples and you may want to consult your mortgage consultant for the exact dollar amounts you will have to pay.
You may want to use mortgage calculator to get your exact numbers.
Best Wishes
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