Q:  What is the right type of loan?

A:  It might be interesting for you to Google Freddie Mac and look up the 200 year historical interest rate chart. Did you know that when John Astor was establishing a trading post in the now named Astoria that he was paying a 4% interest rate for his financing? That is about the same interest rate on a 30 year fixed rate mortgage today.

an image of new home loans and 30 year fixed mortgage ratesIt is also important to know how long the average new home loan is held by the consumer. I get all types of answers when I ask the finance professionals. Not one says beyond 8 years. Do you realize the pricing for mortgages takes this into consideration?

The closest true cost of money will be the 1 year adjustable rate mortgage (ARM). That is why the interest rate is lower than the other loan products. Other options like a 3 year (Arm), 5 year (ARM), 7 year (ARM), 10 year (ARM) and 15 year (FIXED) all have interest rates lower than a 30 year (FIXED).

I find it odd that most people will shop really hard on choosing a new home or custom home builder but don’t take the same approach to financing. It’s as if it is blind trust in whom they are working with as a lender. Lenders and loan officers work really hard at building and maintaining relationships. Just make sure you know what you are buying in terms of getting a loan.

The 200 year historical interest rate chart will show how high the interest rates got in the 1980’s. Anybody in the plus 50 group knows how difficult that period was. It also has had a long lasting influence on how the plus 50 group looks at deciding on a mortgage.  Maybe it is time to look differently. If you think interest rates are going to go up take a look at Japan over the last 25 years.

I hope this helps and thank you for reading Ask The Builder and making The Columbian of Vancouver, WA a part of your day.

Please submit questions to jon@quailhomes.com. Jon can be reached direct at 360.907.5800