Interest Rates and Purchasing Power in Missoula, MT

With interest rates reaching such incredibly low levels, it is interesting to see how this affects the purchasing power for a potential home buyer in the Missoula, MT area. In a recent publication by the KCM Blog, they showed the differences in interest rates since 2003.  I thought it might be interesting to apply these rates to a real life situation.

Consider a home in the Lewis and Clark area of Missoula with a value of $235,000.  If a Buyer were to put down 20% on a loan for the home, that would leave $188,000 to be financed.  Here is the breakdown, using just principal and interest with a 30 year fixed mortgage:

2003 – 6.15% – $1,145.35
2004 – 5.75% – $1,097.12
2005 – 5.77% – $1,099.51
2006 – 6.40% – $1,175.95
2007 – 6.38% – $1,173.49
2008 – 6.04% – $1,131.99
2009 – 5.06% – $1,016.13
2010 – 4.32% – $932.57
2011 – 4.01% – $898.62
2012 – 3.25% – $818.19

Wow.  The same amount financed over the same time period has a difference of $357.76 per month when you compare 2006 to 2012!  (I used the current rate of 3.25% for 2012.)  That is a huge difference when it comes to the amount of purchasing power that a Buyer has!

Please keep in mind that taxes and insurance would need to be added to this for a total monthly cost, but current taxes (estimated about $2,500 per year) and homeowners’ insurance (estimated at $800 per year) would add another $275/month to the amount listed above.

Interest rates are currently at a incredibly low level.  It is definitely worth looking into what impact this could have on your own life, whether you are looking at purchasing or at refinancing your current home.