Building Equity With Low Interest Rates

By now, homebuyers are well aware that low interest rates make this the perfect time to purchase a new home. What many don’t realize is that these rates might also make it easier for you to shorten the term of that loan and rapidly build equity.

In September, Freddie Mac reported that the average for a 30-year fixed rate reached 2.90 percent. The rate was 3.64 percent a year ago. The 15-year fixed-rate average reached 2.40 percent. It was 3.16 percent a year ago. The 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 2.96 percent. Last year, it was 3.38 percent.

What this means for homebuyers like you is that your 20 percent down payment and a loan at a lower interest rate could get you more home than you anticipated. That’s because as interest rates decrease, affordability increases.

There is another side to this, however. Lower interest rates could mean that you could qualify for a 15-year loan instead of a 30-year loan for the same or slightly higher monthly payment. Doing so, means you could own your home outright in less time but it also means you will build equity much quicker.

Simply put, home equity is the amount of your home that you actually own. It is calculated by subtracting your mortgage balance from the home’s market value. Equity grows as you make your monthly payments. It is important because this represents a reserve you can draw on. Lenders often set borrowing amounts based on the amount of equity you own.

With a 15-year loan, you are paying more toward the principal so you can pay off the loan faster. In doing so, you are building equity much faster than someone with a 30-year loan. How is that advantageous? It can help you get a substantial home equity loan or if you decide to sell, you will receive more money that could be used to buy a more expensive home.

The bottom line is that low interest rates can save you money and get you into the community of your dreams — a Johnson Development community. Something many happy homeowners discovered this year. So far this year, more than 3,600 homes have been sold in the 17 communities Johnson has developed, making Johnson the best-selling developer in the nation.

It’s easy to see why. Each community is carefully curated to maximize connections between families, friends and neighbors. Cul-de-sacs are common, amenities encourage residents to stay and chat. Schools are often located on-site.

Johnson Development communities are located in the Houston, Dallas-Fort Worth, Austin and Atlanta areas. Check them out and start building equity in your home today.