4.5% Mortgage Rates??
A new proposal from Washington / Treasury Paulson basically says that they want to cut mortgage interest rates to 4.5% for new loans. If you are in the 25% Federal tax rate and 9.3% state tax rate and itemize your taxes, then this mortgage rate is effectively around 3%. It’s basically another plan to keep home prices high, but the cost to get a loan would be reduced significantly. It could definitely benefit those borrowers who have equity in their homes, but a lot of people who bought in the last couple years are underwater quite a bit.
In San Mateo County I don’t think this will affect us very significantly. A lot of people who want to live in the “better” neighborhoods get jumbo loans. Next year the jumbo loan limit will be $625,500 for San Mateo so the cities where an average home costs significantly more would not benefit much.
However, I think this is a good sign for all of you who are still sitting on the fence to wait before jumping into buying real estate. If you have cash for a downpayment and good credit, then getting a 4.5% mortgage rate is awesome. I think it could go even lower since these guys in Washington are trying crazy desperate things every single day. They seem like chickens with their heads cut off, and there may be opportunity for those who are patient.
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Very good post, thanks!