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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Les H who wrote (13128)	8/24/2003 3:36:48 PM
From: biometricgngboy	Respond to of 306849

RATES RISE, BUT A HOME IS STILL A BUY By DESMOND MacRAE [PHOTO] CHANGING TIMES: Mortgage rates may be rising, but buyers are still getting better deals than they did in the 1990s. - AP August 24, 2003 -- Interest rates may be rising, but at least one prominent financial pro believes now may be the ideal time to snap up a house from sellers fretting an end to the steady climb of property values. August has brought a big jump in interest rates - popping to around 6.4 percent from just 6 percent earlier in the month for a fixed-rate, 30-year mortgage, according to the Mortgage Bankers Association of America. "The fact that mortgage rates are up should not discourage first-time home buyers," financial guru and author Jonathan Pond said. Pond points out that a year ago, house buyers had to bid premiums of 10 percent or more over the asking price in high-priced areas like greater New York. But rising rates put a crimp on housing prices, so sellers are more motivated. "Now," he said, "you can buy at less than the asking price." When rates were at 6 percent, a $100,000 30-year mortgage meant monthly payments of $655, and a total payment of $116,000. By mid-August, mortgage rates were 6.37 percent, pushing monthly payments to $679 and total interest cost to more than $124,000. So home owners who see their house as a piggy bank just ready to crack open may be more flexible if they believe the housing gravy train is pulling out of town. Pond believes mortgage rates will ease back down for a while. If they do, housing costs will rise again because when interest rates go down, mortgages get cheaper, which brings in more buyers. When interest rates go up, housing prices go down. "But," he added, "no one can predict where interest rates will go in the long term. Given expected government deficits and rising inflation, it could get worse. In August 1999, rates were about 8 percent. But higher rates mean higher interest costs. Rates at 8 percent mean monthly payments of nearly $800, and interest payments of $164,000 per $100,000 mortgage. Paying a higher rate on a mortgage, though, can be managed. Pond recommends an old trick called "doubling up." Mortgage payments have two parts: principal and interest. "If, with every payment, you pay next month's principal with this month's principal and interest, you can cut your mortgage exactly in half," he said. A 30-year mortgage can be paid off in exactly 15 years, and the $164,000 for an 8 percentage mortgage is just $82,000. This is a nifty strategy, particularly in the first few years of a mortgage. Doing this regularly means having a formal commitment to owning your house in half the time. Doubling up takes real grit. "But after a couple of years, people start to have eyes on the prize and will do almost anything to make that extra payment each month," Pond noted. nypost.com