Today we are discussing interest rates for VA loans and how rates have dropped to their historical lows recently. Also in this video, I’m going to briefly address why you should reduce the term on your mortgage and how long it would take to pay off that mortgage.
The time to take advantage of interest rates is now. If you’ve turned on the news at all recently, you’ve probably heard the words “BREXIT” and “Federal Reserve” several times. What’s important to know is that all the developments happening with Great Britain and the Federal Reserve have done a lot of good for interest rates.
Let’s quickly check out this very interesting chart that shows the history of the 30-year fixed-interest loan, starting roughly in 2006. Back in 2001, I got an 8.5% interest rate on my house. But take a look at where trends have taken us since then. True, there have been ups and downs, but the overall trend is down. If we were to look at the trend beyond what is on this chart, we would see that after BREXIT (Britain’s decision to leave the European Union), this chart would almost drop down to the lows that we hit after the collapse of the housing bubble.
VA Rates at Historic Lows: Why Has This Happened?
BREXIT is one reason. There has also been a lot of economic uncertainty right now, which includes jobless claims, unemployment, questions about future housing market fluctuations, and unpredictable oil prices. Uncertainty creates an environment for low interest rates.
Normally speaking, around the time of pending presidential elections, interest rates will not rise because candidates don’t want to be responsible for driving interest rates higher. There’s also a very loose Federal Reserve right now, for lack of a better term. Janet Yellen, the chair of the Federal Reserve, and the chairs before her have firmly believed in keeping interest rates low for the past 15 years since they believe that is what drives the economy.
Now, let’s address term reductions. Take a second to pause the video if necessary and see that I’ve put two loans side by side. A 3.75% 30-year fixed VA loan (which is what a lot of our clients have right now) with an average amount of $225,000. Now, keep in mind that with a 3.75% 30-year fixed loan, PI payments will be around $1,042 a month. On top of that amount are taxes and insurance charges. Adding up all of the payments equates to $375,124 on your home.
Now let’s take a look at a 3.25% interest rate. Now I’m not going to offer that rate today or disclose annual percentage rates because you need to call us in order for us to determine what sort of rate you’re able to get.
But you’ll notice through this example that by simply reducing interest by a half point and cutting just 5 years off your loan, your PI payment every month only goes up by about 50 bucks. Now, if you can’t afford that, you have to look at other options. But just by taking off those 5 years, you would be saving over $46,000 in interest. By cutting even more time than that, we’ve seen people save over $150,000 on their homes. With a shorter term, you pay back the bank quicker and spend less interest.
How to Take Advantage of These Low VA Rates
Rates will not stay this low forever, so you need to make it happen! First, make a decision and then follow through with it. Obviously we want you to work with us at Low VA Rates (and we really do offer low rates), but at least call your current bank. As a military homeowner, you have earned the right to get the lower-than-normal interest rates through the VA. So, please, do something. Because you served, you earned this right, and you really should take advantage of it.
I love the saying “The secret to getting things done is to ACT” by Dante Alighieri.
No secret sauce here. Many of you who have been watching this video have been fence sitting for the last couple of years. But all of this economic uncertainty is putting you in a position of where you need to act now. Interest rates do not have room to go much further.
Thank you for watching this short informational video from your VA mortgage expert Low VA Rates.