Interest rates are a part of real estate that can be difficult for clients to understand. The ability to walk clients through this and help them understand interest rates can set agents apart. Clients really appreciate knowledge and clarity during the process of searching for a home.
Read on to get some tips on walking clients through a confusing part of home-buying.
Impact of Interest Rates
Interest rates impact the home-buying process greatly. Securing the best possible interest rate is critical in purchasing a home and can make or break a monthly mortgage payment.
If an interest rate is higher - the higher the mortgage payment and vice versa.
The concept of interest is easiest to understand if clients think of it like a credit card payment - it's simply the cost of a loan or a line of credit. Just like some credit cards have lower, or better, interest rates, so do mortgages.
Interest Over Time
Interest rates for mortgages are typically done at an Annual Percentage Rate (APR) and therefore go up incrementally every year. The way mortgage payments are set up also ensures that more interest is usually paid at the beginning and more principle (the actual loan on the home) is paid more at the end. Why? Because it's safer for lenders this way.
A very tricky part about these rates is that they constantly change. Lenders can usually "lock" an interest rate for a very short period of time.
Even the smallest rise in rates can be very impactful considering the overall price of a loan.
Informing clients that rates are low or perhaps, high, and the natural swing of the economy and mortgages is a great place to start a relationship built on knowledge, integrity, and trust.
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