February

The sun is trying to sneak out some days and we have enough snow to bring the snowmobiles out this year in Northern Wisconsin.  Winter is dragging on and each year it gets a little longer for me at least.   There still doesn’t seem to be much certainty in terms of the economic outlook but the volatility hasn’t been terrible either.

Where are rates?  This is the most common question I hear.  In all honesty they aren’t too different today then they were 3, 6, or 9 months ago unfortunately.  We saw a little dip around the start of 3Q 2024 but it was short lived and when things get put on a 12 month chart there is some up and down but today’s rates are realistically very similar to what we saw for a lot of the last year.  Average 30 year rates as of early February continue to hover in the low 7% range.   

Unfortunately we don’t really have much control over interest rates.   They are the by product of much bigger decisions than any of us make individually.   What can those of us do to make sure we get the best rates?  Well keeping credit scores above 740 is the biggest factor.   Generally speaking having a larger down payment can help but this isn’t always the case, especially with first time home buyers.  

The other thing that can really help not just with interest rate but total cost of borrowing is amortization term length.  If you can swing a 15 year mortgage instead of the traditional 30 year amortization the interest savings are huge, even with the same rate.   Taking a $200,000 mortgage on a 30 year fixed product the payment would be $1,330.60 assuming 7.00% interest rate.   The same $200,000 mortgage on a 15 year fixed product the payment would be $1,797.66/month at 7.00% interest.   Both of these assume no PMI and no escrows.   The 15 year payment is $467.06 more per month, or 35.1% more.  The length of the term before the debt is retired is half when comparing a 15 year vs 30 year product.  The real difference is total interest paid, that 15 year product will have total interest of $123,577.84 whereas the 30 year product will have $279,021.94 in interest.  This means that this 30 year product will have over 2.25 times the interest paid versus a 30 year, even with the same rate.  Both these assumptions assume no extra principal payments made, only scheduled monthly.

Control what you can control when it comes to both borrowing money and life, and don’t worry about what you can’t control or it will control you.  Smart financial decisions often involve taking a step back and looking at all the variables at play.