The lowest interest rates in history are making greater affordability in New York real estate than ever before. Just a one percent difference in interest rate on a 30 year mortgage of a New York City property can make a difference of hundreds of dollars each month in the mortgage payment. Lower interest rates can also mean that buyers qualify for a larger mortgage amount and a greater selection of inventory.
Interest rates are crucial in determining what a buyer can afford to purchase. No more than 28% of a family’s gross monthly income should be used toward housing expenses to qualify for a conventional mortgage. The lower the interest rate, the lower the monthly payment; the lower the monthly payment, the more the buyer will qualify for.
A family that can afford a mortgage payment of roughly $3800.00 per month qualifies for a mortgage amount of around $675,000.00 at a 30 year fixed rate of 5.5%. If that same family could get an interest rate of 4.5%, they could then afford a mortgage of $750,000.00. Affordability is the driving force behind the housing market recovery right now. Low prices and historically low interest rates have opened new doors into areas that buyers never believed they could afford to buy in.
The lower interest rates are not only helping New York buyers, they are also helping people making their living with a New York real estate license. With the average commission for professionals with their New York real estate license is 6% on the sale price, then the buyer qualifying for the additional money could earn the New York real estate licensee additional commission. The real estate agent that sells the $750,000.00 home to the family that could only qualify $675,000.00 before the drop in interest rate will earn an additional $4500.00 on the sale.
Low interest rates mean that New York buyers will be able to afford more for their money. Whether it is a bigger house or a better neighborhood, the buyer will surely benefit from today’s historic low interest rates. Larger purchase prices will translate into higher commissions if you have your New York real estate license.
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About David Goldstein — David Goldstein is an Owner and Founding Partner of Express Schools, LLC. which operates online education providers Real Estate Express, Insurance License Express and License Tutor. Follow him on Twitter.