Interest rates and the cost to build

Dated: May 9 2021

Views: 126

The interest rate that your bank pays and the interest rate that you borrow for your mortgage are closed correlated, but in today’s hot market,  supply and demand are also having an effect on the interest rate you will pay for your loan.  Before I go into this discussion and my personal experience, here is the latest interest forecast from the Mortgage Bankers Association (Download as PDF here

As some of you know, Gail and I recently bought a new home, and although we have not had a mortgage in years, with the low rates that we could achieve, we decided to leverage this purchase and put the balance into other investments, (Real Estate and Bitcoin). The interest rate we were quoted was higher than I expected, however.   Gail and I both have credit scores in the high 700’s and low 800’s so I anticipated the lowest rates advertised. To my surprise our final rates was 3.2%.  Number one, the lower rates that are promoted on Facebook etc are teaser rates and include points, (fees to get the lower rate),  but tyhe rate also has to do with supply and demand.  Lenders and mortgage brokers are simply slammed, and they will charge more, well, because they can.

 

Price increases are not just happening in lending. The cost of borrowing money, as you  can see from the above table from MBA, will continue to be low and attractive.  Not so with the cost of construction materials:

To see more info on construction costs go to this link: US Construction Material Costs. ( The source of the above table)

 

Interesting side note, the home Gail and I bought cost us $359,000, the same model today, if it was even available (it is not, as the community is now sold out) would be $420,000+. We closed April 15th!

 

If I can help you with your real estate needs, please let me know.

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Gregg Fous

Real estate has been my passion since I took my first Al Lowery class on real estate investing in the 1970’s. I vowed during that class that I would buy one property a year. Over the next five ....

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