A stabilizing housing market and population gains will help Arizona’s economy expand faster than the nation’s again this year, though the gap will narrow, according to a forecast released April, 2018. Condo sales in Phoenix, AZ booming as a result.
These are the key findings:
Another year of solid growth: Arizona’s economy, which expanded 2.6 percent in each of the past two years, is poised to grow 2.7 percent this year, according to the forecast by BMO Capital Markets.
Wages are a big part of it: Personal income in Arizona has historically lagged, but the state seems to be catching up a bit. Wage growth in Arizona, up 7.4 percent over the past four quarters, is running at one of the fastest paces in the nation, according to the report.
Then there’s housing: Two of Arizona’s largest employment sectors, real estate and government, have exerted a drag on the state’s economy. However, heady population gains and a low foreclosure rate bode well for real estate.
“The Arizona housing market is still battling the effects of the 2008 housing crisis but could finally be normalizing after a prolonged recovery,” wrote economists Michael Gregory and Priscilla Thiagamoorthy of BMO Capital Markets in Toronto.
Expanding population helps: Housing and other sectors of the Arizona economy have been aided by an influx of residents for the state.
“If population continues to grow and labor market conditions tighten, the state may have a greater need for housing supply,” and condos are becoming extremely attractive, according to the report.
U.S. picture improving: Arizona’s gains come against the backdrop of a strengthening U.S. economy.
The nation’s economy grew 1.5 percent and 2.3 percent in 2016 and 2017, respectively. BMO expects that will improve to 2.6 percent this year.
“The dominant (national) theme is improving manufacturing prospects prodded by increasing business investment stoked, generally, by late-cycle capacity constraints and tax cuts,” wrote Gregory and Thiagamoorthy. “Factories are also benefiting from expanding exports, reflecting stronger global growth and a weaker U.S. dollar.”
If the condo lifestyle is something you’re considering, or, if it’s all you can afford now, please give me a call for free, no obligation consultation. I specialize and LOVE working with first-time homebuyers and am am FIRM believer that THERE IS NO SUCH THING AS A STUPID QUESTION. I’ll take all the time with you that you need!
If you’re one the fence about buying a home in Phoenix, it’s time to get off. It’s been a long, hard road to recovery for metro Phoenix’s boom-and-bust-battered housing market, but it’s back, and then some.
Metro Phoenix home prices are rising the fastest in many of its most affordable, centrally located neighborhoods, from downtown Phoenix to central Mesa, where young buyers want to live and can afford houses.
2017 was a good year for the housing recovery in the Phoenix area. Almost one-third of the Valley’s ZIP codes posted double-digit-percentage increases in prices last year, according to The Arizona Republic/azcentral Street Scout Home Values report.
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But there is concern buyer demand for affordable homes is beginning to outpace the supply. And there’s always worry in Arizona about the possibility of another housing bust when prices climb for a few years.
Most of those areas still have median home prices below $300,000.
“Last year was a strong one for the Valley’s housing market, particularly the more affordable neighborhoods closer in,” said Tina Tamboer, senior housing analyst with the Cromford Report. “Only 2004, ’05 and 2011 were better years for home sales, and those weren’t normal years.”
The housing boom inflated home prices and sales between 2004 and 2006, and then investors drove up sales as foreclosures climbed and prices plummeted from 2010 to 2012.
Home prices have doubled in many Phoenix-area neighborhoods since the bottom of the market. Besides the 30 ZIP codes where home prices have bounced back from the crash, values in another 40 neighborhoods are within 10 percent of recovering.
Fastest-growing home prices In the Phoenix Metro Area
“We fell in love with the area, but saw prices and rents climbing fast,” Williams said. “We knew we wanted to buy, but there was a lot of competition for the houses we liked.”
Woodland is part of the 85007 ZIP code,one of central Phoenix’s more affordable neighborhoods. The area, which has also attracted many investors, saw its overall median home price climb 10 percent to more than $192,000 in 2017. Sales in the area jumped nearly 20 percent last year.
Home prices in their neighborhood on the western side of downtown have rebounded from the crash and are almost 2 percent higher than they were in 2006.
Aysia and Benjamin were so lucky and bought from their wonderful neighbor, who didn’t want to sell to an investor.
The couple’s house, for which they paid less than $250,000 a few months ago, wasn’t even listed for sale.
People talk about the gentrification of central Phoenix pricing too many first-time buyers out. But more high-end home sales in the area help other more affordable areas like Woodland and Coronado Historic District improve, too.
Buying a house in the hot 85007 neighborhood of Phoenix included graffiti art in the backyard of Ben Hughes and Aysia Williams’s home.
‘First-time homebuyer market is exploding in Phoenix, AZ’
Stephanie Silva and Billy Horner moved to Chandler, AZ, from Chicago for the warmth last March.
“We wanted to rent first to see if we liked the area and a ‘shovel-free life,’ ” said Silva, who works in Tempe. Horner works in downtown Chandler.
The couple recently bought a home for under $275,000 in the central Mesa, AZ ZIP 85210, almost halfway between their jobs. Prices in the still-affordable neighborhood climbed 9 percent, and sales rose 38 percent last year.
Home values just rebounded back to 2006 levels in their neighborhood, where the median price is about $215,000.
“We are on a quiet, cozy block in a home with a pool and a yard,” Silva said. “So far, it is everything these Midwest transplants could ask for.”
The couple’s real-estate agents said if more people don’t decide to sell in the popular, affordable neighborhoods closer in, then it will soon get even tougher for first-time buyers.
“The first-time homebuyer market is exploding. So many people are done with renting and dealing with landlords,” Matthew Coates said. “But we are seeing a deficit of homes available.”
The number of Valley homes for sale priced under $350,000 is down almost 20 percent from last year, according to the Cromford Report.
Some potential buyers are giving up
Nils and Heather Hofmann began looking for a home midway between their jobs in Deer Valley and Chandler more than a year ago. Their budget was $300,000.
The couple, who was renting in north-central Phoenix, put their home search on hold last fall after seeing dozens of houses. The ones they liked usually sold before they could get an offer in.
“I think we must have seen more than 80 houses,” Heather Hofmann said. “We wanted to buy where we were renting, but prices were too high.”
The couple decided to stop looking for a while late last summer because it became too frustrating. But then they found out Heather was pregnant, resumed their search and upped their price to $400,000.
The Hofmanns bought a home last month in north Phoenix’s Desert Ridge neighborhood, close to several freeways for their commute.
The median home price in the Desert Ridge area is about $485,000, up 5 percent from 2016.”
Looking farther outside of Phoenix Proper for Real Estate to Buy
The metro Phoenix suburbs farthest out were hardest hit by the crash and have been the slowest to recover.
But both sales and prices are again climbing in those areas, including the West Valley suburbs of Goodyear, Surprise and Buckeye and southeast Valley areas of Queen Creek and Maricopa.
The median home price in the Buckeye ZIP code 85326 is up almost 10 percent from last year to $192,000. But the area’s home values are still about 19 percent off the 2006 peak.
Will 2018 be the year for Phoenix?
Metro Phoenix home prices continue to climb in most neighborhoods.
The median Valley home price is now about $253,000, up from $235,000 a year ago.
Some homeowners and national market watchers see price increases in the Valley and are concerned about another bubble.
“The housing market is very solid now. But there’s nothing that shows we are heading for another crash.
Metro Phoenix’s December 2017 median price of $250,000 is still below the high of $260,000 from 2006.
Housing market watchers say 2018 could be better than 2017 for prices and sales.
Whether this is the year the area’s median market reaches that 2006 level depends on whether first-time buyers can find homes they can afford.
“Either low inventory numbers for homes for sale will restrict sales because buyers can’t find houses in their price range or Millennials, the driving force behind our market, will be able to and decide to buy,” said Tom Ruff, housing analyst with The Information Market, owned by the Arizona Regional Multiple Listing Service.
“That, coupled with an improving economy, will lead to increased sales in 2018,” he said.
Rising mortgage rates could have a big impact on buying a home when shopping for real estate, economists warn. “Every time the interest rates go up, you eliminate a group of people who can no longer afford to buy a house,” Some people may have to rent for a period of time until they make more money, or buy a smaller house,” says Laura Boyajian of Wise Choice Properties, Historic Phoenix Homes Specialist.
Learn How to Save Money Now
To avoid further complications in their plans, your home buyers may want to speed up their home search this Spring as interest rates are forecasted to move higher in the coming months. Forty-four percent of home buyers say rate increases likely will force them to settle for a smaller, less expensive home that requires a longer commute to their jobs, according to a realtor.com® survey. First-time home buyers may be most affected by rising costs, as increasing home prices and interest rates price some out of the market.
Mortgage rates are at their highest levels in more than four years. The 30-year fixed-rate mortgage averaged 4.46 percent last week, according to Freddie Mac, and that’s largely expected to increase since the Federal Reserve said it is likely to raise its short-term interest rates this year. That could prompt mortgage rates to move higher at least three times this year, starting this month.
“For the bulk of buyers, it’s not going to kill their decision to purchase a home,” Rick Palacios Jr., director of research at John Burns Real Estate Consulting, told realtor.com®. “If anything, it will get them off the fence by creating a sense of urgency.” Higher rates are “a kick in the pants for you to start thinking seriously about buying.”
Rate increases, even minor ones, can add up over time. Realtor.com® offers this example: On a $300,000 house with a 30-year fixed-rate mortgage and 20-percent down payment, the difference between a 4 percent and 5 percent mortgage rate is $142 a month. Calculated over the life of the loan, that is more than an extra $51,000. “Buyers thought they could wait forever because rates were going to stay low forever,” says Boyajian. “They’re starting to realize that if they’re going to buy, they should probably buy now.”
Home buyers who are concerned about rising rates may want to lock in with a lender, which guarantees the current rate for a set period of time. Still, don’t let your clients linger on making a decision. It typically costs several hundred dollars to lock in a rate.
If you are interested in a free consultation to see if buying a Phoenix home is a better option for you and get pre-approved for a home loan, please call or email me today. You may be surprised at what you learn. I have access to programs that offer down-payment assistance with money you do not have to pay back.
Whether you’re buying or selling a home in Central or Downtown Phoenix, or just have some questions about anything at all in or about any one of the historic districts in Phoenix, I’d be very happy to help you! Just call or email me anytime.
Home buyers looking to head back into the market in Arizona may do so in a state where it’s pretty decent to get a mortgage.
Learn How to Save Money When Owning a Historic Phoenix Home
A new SmartAsset.com look at the best counties for getting a mortgage finds those in Arizona among the tops in the country. Pinal County came in first in the state and No. 34 nationally.
The report looked at five-year borrowing costs for as a ranking measure, but also examined property taxes, loan funding rates and annual mortgage payments to determine a composite score.
While the state’s most populous counties, Maricopa and Pima, ranked well nationally they were behind the curve in the state, ranking No. 3 and No. 9 respectively.
The best counties to get a mortgage mostly reside in Florida, with six of the top 10 in the ranking in the Sunshine State.
For many people buying a house means securing a mortgage. To determine the best places in the country to get a mortgage we looked at four factors: overall borrowing costs, ease of securing a mortgage, cheap property taxes and cheap annual mortgage payments.
To calculate the overall borrowing costs, we looked at the expected costs over the first five years of a $200,000 mortgage with a 20% down payment, including closing costs. We calculated the ease of getting a mortgage as the ratio of mortgage applications to actual mortgage originations (secured mortgages) in each county. We based annual mortgage payments on the annual principal and interest payments for a $200,000 loan in that location, using average mortgage rates in each county.
Finally, we ranked locations based on these four factors, and then averaged those rankings, giving equal weight to each factor. The areas with the lowest average rankings are the best places to get a mortgage.
Loan Funding Rate
5 Year Borrowing Costs
Annual Mortgage Payment
Best Mortgage Markets Index
Sources: Mortgage Bankers Association, US Census Bureau 2015 5-Year American Community Survey, Informa, Bankrate, government websites, SmartAsset
DAILY REAL ESTATE NEWS | THURSDAY, DECEMBER 01, 2016
The national housing market is largely predicted to moderate in 2017, but a handful of metros are expected to beat expectations. In fact, 10 markets are looking like hot-beds for growth in the new year with Phoenix, Arizona being number one.
Realtor.com®’s research team has flagged markets that will likely see average price gains of 5.8 percent and sales growth of 6.3 percent in 2017. Those gains would exceed next year’s anticipated national growth of 3.9 percent in home prices and 1.9 percent in home sales.
As such, real estate professionals in these 10 markets should expect a booming business in 2017. Realtor.com® notes these are the hottest housing markets to watch in the new year, based on price and sales gains:
Why are expectations so high for these 10 markets? Realtor.com®’s research team notes that strong local economies and population growth are helping to fuel sales. Also, the top 10 housing markets have other commonalities, such as relatively affordable rental prices, low unemployment, and large populations of millennials and baby boomers.
Top Housing Trends for 2017 Next year’s predicted slowing price and sales growth, increasing interest rates and changing buyer demographics are setting the stage for five key housing trends:
Millennials and boomers will dominate the market – Next year, the housing market will be in the middle of two massive demographic waves, millennials and baby boomers – that will power demand for at least the next 10 years. Although increasing interest rates have prompted realtor.com® to lower its prediction of millennial market share to 33 percent of the buyer pool; millennials and baby boomers will still comprise the majority of the market. Baby boomers are expected to make up 30 percent of buyers in 2017 and given they’re less dependent on financing, they are anticipated to be more successful when it comes to closing.
Midwestern cities will continue to be hotbeds for millennials – Midwestern cities are anticipated to continue to beat the national average in millennial purchase market share in 2017 with Madison, Wis.; Columbus, Ohio; Omaha, Neb.; Des Moines, Iowa; and Minneapolis, leading the pack. This year, average millennial market share in these markets is 42 percent, far higher than the U.S. average of 38 percent. With strong affordability in 15 of the 19 largest Midwestern markets, realtor.com® expects this trend to continue in 2017 even as interest rates increase.
Slowing price appreciation – Nationally, home prices are forecast to slow to 3.9 percent growth year over year, from an estimated 4.9 percent in 2016. Of the top 100 largest metros in the country, 26 markets are expected to see price acceleration of 1 percent point or more with Greensboro–High Point, N.C.; Akron, Ohio; and Baltimore–Columbia–Towson, Md., experiencing the largest gains. Likewise, 46 markets are expected to see a slowdown in price growth of 1 percent or more with Lakeland–Winter Haven, Fla., Durham–Chapel Hill, N.C.; and Jackson, Miss., undergoing the biggest shift to slower price appreciation.
Fewer homes on the market and fast moving markets – Inventory is currently down an average of 11 percent in the top 100 metros in the U.S. The conditions that are limiting home supply are not expected to change in 2017. Median age of inventory is currently 68 days in the top 100 metros, which is 14 percent – or 11 days – faster than U.S. overall.
Western cities will continue to lead the nation in prices and sales – Western metros in the U.S. are forecast to see a price increase of 5.8 percent and sales increase of 4.7 percent, much higher than the U.S. overall. These markets also dominate the ranking of the realtor.com® 2017 top housing markets, making up five of the top 10 markets on the list (Los Angeles, Sacramentoand Riverside, Calif., Tucson, Ariz., and Portland, Ore.) and 11 of the top 25 (Colorado Springs, Colo.; San Diego; Salt Lake City; Provo–Orem, Utah; Seattle. and Oxnard–Thousand Oaks–Ventura, Calif.)
Fixed-rate mortgages this week dropped to their lowest averages of the year, which analysts attribute to the fallout from last week’s “Brexit” vote.
The 30-year fixed-rate mortgage averaged 3.48 percent this week, only 17 basis points from its all-time record low of 3.31 percent in November 2012, Freddie Mac reports.
“In the wake of the Brexit vote, the yield on the 10-year U.S. Treasury bond plummeted 24 basis points,” says Sean Becketti, Freddie Mac’s chief economist. “This extremely low mortgage rate should support solid home sales and refinancing volume this summer.”
Freddie Mac reports the following national averages for the week ending June 30:
30-year fixed-rate mortgages: averaged 3.48 percent, with an average 0.5 point, falling from last week’s 3.56 percent average. Last year at this time, 30-year rates averaged 4.08 percent.
15-year fixed-rate mortgages: averaged 2.78 percent, with an average 0.4 point, dropping from last week’s 2.83 percent average. Last year at this time, 15-year rates averaged 3.24 percent.
5-year hybrid adjustable-rate mortgages: averaged 2.70 percent, with an average 0.5 point, falling from last week’s 2.74 percent average. A year ago, 5-year ARMs averaged 2.99 percent.
The 30-year fixed mortgage rate dipped to its lowest average of the year this week, averaging 3.58 percent, Freddie Mac reports in its latest mortgage market survey.
“Demand for Treasuries remained high this week, driving yields to their lowest point since February,” says Sean Becketti, Freddie Mac’s chief economist. “In response, the 30-year mortgage rate fell 1 basis point to 3.58 percent. This rate represents yet another low for 2016 and the lowest mark since May 2013.”
Freddie Mac reports the following national averages with mortgage rates for the week ending April 14:
30-year fixed-rate mortgages: averaged 3.58 percent, with an average 0.5 point, dropping from last week’s 3.59 percent average. Last year at this time, 30-year rates averaged 3.67 percent.
15-year fixed-rate mortgages: averaged 2.86 percent, with an average 0.5 point, falling from last week’s 2.88 percent average. A year ago, 15-year rates averaged 2.94 percent.
5-year hybrid adjustable-rate mortgages: averaged 2.84 percent, with an average 0.4 point, rising from last week’s 2.82 percent average. Last year at this time, 5-year ARMs averaged 2.88 percent.
Mortgage rates this week plunged to their lowest level since February 2015, unlocking more savings for home buyers and home owners who are refinancing.
“Mortgage rates this week registered the delayed impact of last week’s sharp drop in Treasury yields, as the 30-year mortgage rate fell 12 basis points to 3.59 percent,” says Freddie Mac chief economist Sean Becketti. “This rate marks a new low for 2016. Low mortgage rates and a positive employment outlook should support a strong housing market in the second quarter of 2016.”
Freddie Mac reports the following national averages with mortgage rates for the week ending April 7:
30-year fixed-rate mortgages: averaged 3.59 percent, with an average 0.5 point, dropping from last week’s 3.71 percent average. Last year at this time, 30-year rates averaged 3.66 percent.
15-year fixed-rate mortgages: averaged 2.88 percent, with an average 0.4 point, falling from last week’s 2.98 percent average. A year ago, 15-year rates averaged 2.93 percent.
5-year hybrid adjustable-rate mortgages: averaged 2.82 percent, with an average 0.5 point, dropping from last week’s 2.90 percent average. A year ago, 5-year ARMs averaged 2.83 percent.
As the number of young professionals and entrepreneurs across the Valley has continued to increase, so has the market for alternatives to the traditional office.
Lauren Potter, Special for The Republic | azcentral.com | February 18,2016
Developers in the Valley are responding to this trend by creating shared, or co-working, spaces.
Unlike traditional offices, these spaces allow people who are self-employed, work for small companies or don’t have a dedicated office space to share equipment and collaborate under one roof.
People want to come downtown
The Department, on the sixth floor of 1 N. First St. in downtown Phoenix, is one of the Valley’s newest co-working spaces. A project by private investment firm Marketplace One, the space was created to house the growing number of small-business owners and startups the firm was investing in and working with.
“We saw a need, especially downtown,” said Kyle Frazey, operating manager of the collaborative workspace. “People were wanting to come downtown more, especially the younger Millennials, tech entrepreneurs and investors.”
The 16,000-square-foot space is visually striking and offers views of South Mountain from its sixth-floor windows. Custom contemporary furniture dots the bright open-plan design, which houses three shared conference rooms, private offices, shared and reserved workstations, as well as a central lounge and kitchen area.
According to Frazey, current members include artists, private-equity investors, consultants, digital agencies and non-profits. While their industries may be different, Frazey said members share something in common.
“They’re really people that want to help each other succeed,” Frazey said.
Frazey said the space was designed to be collaborative, adding that this type of space has a certain energy and encourages relationship-building among those co-working there.
Three levels of membership are available (flex, reserve and team) starting at $200 per month. There are no hourly or daily pricing options. However, there is another co-working space in Phoenix that targets this niche market.
Co-working — with an emphasis on hospitality
A joint project between Valley developers Ironline Partners and Novawest, Mod is a meeting and workspace option for on-the-go and mobile workers. It offers a stylish lounge feel and, unlike other shared workspaces, places a strong focus on hospitality.
Located at 2828 N. Central Ave. in midtown Phoenix, Mod caters to traveling and mobile professionals. It offers amenities a traveling worker expects: Wi-Fi, printers and copiers, private and public workspaces, meeting rooms, notary services, a coffee shop, healthy cafe and bar.
There also are unexpected perks.
“If we notice one of our clients hasn’t taken a break in a really long time, (we) might surprise them with a hot towel or refreshment,” said Jamie Shaw, brand experience director at Mod. “We want you to feel pampered.”
According to Shaw, if clients need to ship a package or borrow a phone charger, the on-site “Modcierge” can help.
Phoenix is Mod’s first location, and the company is opening a space in San Francisco’s Mission District this year. A third location is planned for Seattle in 2017. Company officials say they are exploring a second Valley location, possibly in Tempe.
Work and home
Residential developers also are responding to the need for alternative workspaces.
A Chile-based commercial developer, Sencorp, has targeted this mobile-workforce market with their first U.S. project, en Hance Park located at 1130 N. Second St. in downtown Phoenix, with prices from $150,000.
Eight of the 49 units are zoned as live-work spaces with a ground-level entrance to the home office area. Alvaro said the units are best suited to “low-traffic” home-based businesses such as design, insurance or real estate. The units cater to a small and underserved part of the market, Sencorp Chief Operating Officer Alvaro Sande said.
“It’s not all the market,” he said. “It’s a niche.”
In Scottsdale, developers are targeting the live-work niche, but with a focus on luxury.
SoHo live-work townhouses and condominiums, under construction near WestWorld of Scottsdale at Bell Road, range from $651,300 to more than $1 million. Starting at 3,939 square feet, the residences give buyers the opportunity to operate a retail business on the ground-floor space.
A great workspace attracts and keeps talent
Whether working from home or in a shared or traditional office space, the design and energy of modern workspaces is increasingly important.
According to Colliers International Director of Workplace Innovation Keith Perske, the environment in which people work makes a difference to employees and business owners alike.
“If you can change the workplace, you can (positively) affect a lot of people’s lives,” Perske said.
“Companies that really get it understand the way a workplace functions as a way to attract and retain talent,” he said.
If paying off your house is a priority, you’ve obviously considered it. “One of the biggest benefits of a 15-year mortgage term is the ability to quickly pay off your home loan,” said Money Crashers. “This option is perfect if you plan to stay put and don’t want to pay your mortgage for a lengthy period of time.”
But even if you’re not planning to live in your home forever, a 15-year mortgage can be a great way to go because of the money saved. And we’re not talking about pennies. We’re talking hundreds of thousands of dollars.
“The 30-year fixed mortgage is practically an American archetype, the apple pie of financial instruments. It is the path that generations of Americans have taken to first-time home ownership. According to the Mortgage Bankers Association, 86% of people applying for purchase mortgages in February 2015 opted for 30-year loans,” said Investopedia. “But many of those buyers might have been better served if they had opted instead for a 15-year fixed-rate mortgage, the 30-year’s younger, and less popular, sibling. A shorter-term loan means a higher monthly payment, which makes the 15-year mortgage seem less affordable. But, in fact, the shorter term actually makes the loan cheaper on several fronts.”
The savings is substantial
“Imagine a $300,000 loan, available at 4% for 30 years or at 3.25% for 15 years,” they said. “The combined effect of the faster amortization and the lower interest rate means that borrowing the money for just 15 years would cost $79,441, compared to $215,609 over 30 years, or nearly two-thirds less.”
According to The Mortgage Reports, going with a 15-year mortgage translates to a reduction in “the amount of mortgage interest paid over the loan’s life by $44,000 per $100,000 borrowed as compared to a 30-year loan. For loans at the conforming loan limit of $417,000, then, a homeowner would save $183,000 by using a 15-year mortgage to finance the home instead of using a 30-year one.”
That’s a lot of money. But it’s that higher monthly payment that is often the sticking point for many borrowers. The monthly payment on a 15-year loan will cost more than one that’s double in length for obvious reasons—you’re paying off more money in less time. But the two loan terms do not offer an apples-to-apples comparison because the interest rates for 15-year mortgages tend to be lower.
“15-year-loans are less risky for banks than 30-year loans, and because the money banks use to make shorter-term loans costs them less than the money they use to make longer-term loans, consumers pay a lower interest rate on a 15-year-mortgage — anywhere from a quarter of a percent to a full percent (or point) less,” said Investopedia. “And the government-supported agencies that finance most mortgages impose additional fees, called loan level price adjustments, which make 30-year mortgages more expensive.”
The monthly payment on the 30-yer mortgage referenced above is $1,432. On the 15-year loan, it comes out to $2,108. That steep increase is often a deterrent for borrowers – especially those who are more concerned with their current monthly input and output than potential long-term savings.
Doing it on your own
Of course, a 15-year mortgage isn’t the only way to pay your house off sooner. Making additional principal payments can eat away at your balance without tying you to a higher monthly payment. Even one extra payment per year can make a big difference.
“Making an extra mortgage payment each year (totaling 13 payments in a 12-month period) could reduce a 30-year mortgage loan to approximately 22 years,” said Nationwide.
“The most budget-friendly way to do this is to pay 1/12 extra each month. For example, by paying $975 each month on a $900 mortgage payment, you’ll have paid the equivalent of an extra payment by the end of the year.”
Overpaying also offers a shorter path to an equity position, so when you are ready to sell, you have more equity in your home and are in a greater buying position. And if you do get into a situation where you need cash you can always pull the equity out of your home.