Torrance CA, June 11, 2022
As you know interest rates have more than doubled in the last 12 months. Mainly in the last 6 months.
We went from an owner occupied 30 years fixed at 2.5% in June of 2021 to today’s owner occupied rate of 5.5%
On $500,000 you thought your payment (at 2.5%) would be $1975.60 and now you are told the payment will be $700 more per month at $2684? YIKES
So , for those of you who have lived through more than 1 of these bounces in interest rates, we are back to the old tool box. For people who have only been in the real estate business for 5 to 10 years this is a shock.
Yes, interest rates were just a tad lower than today’s rates in 2011. And property values were still dropping, the big hedge funds were buying up all the deals, yet another hard to travel market journey.
So how do we side step having to take on these high rates for our mortgage debt? How o we keep the house payment affordable til interest rates come back down?
Sidestep #1 – stretch it out!
Go to 40 years. By stretching out a $500,000 loan 10 more years at 5% interest we go from a payment of $2684.11 goes down to $2410.98
Sidestep #2 Pay just interest, leave paydown for later
Now what if we did interest only on that same interest rate? The payment goes from $2684.11 down even further to $2083.33.
Sidestep #3 – Go short, not long
What if we did a hybrid loan? A 7/1 ARM fixed to adjustable and cut rate down to 4.625% 40 year interest only?
$1927.08
These loan solutions are not for everyone but help many still get into a house this year. Waiting for tomorrow doesn’t always improve our chances or choices.
Now let’s see how investor can be helped.
At today’s rates on a rental SFR of 6.25% $500,000 would have a payment of $3078.59
If you want to sidestep the high mortgage payment that current rates will cause, and go to a hybrid interest rate, we can get that payment down to 4.875% on a 7/1 fixed to ARM io and a payment of $2031.25
To listen to the full explanation go to:
