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Ready to buy a home or remodel one? Timing is (nearly) everything.

Alerus | AUG 07, 2018

What to know about buying a new home now

Right now, rising wages and strong employment levels are great for our economy and are giving consumers confidence. These same strong economic indicators mean the Federal Reserve continues to increase interest rates. The .25 percent increase in March, 2018 was the sixth rate increase by the Fed since December 2015. The Fed held rates steady at their August, 2018 meeting but indicated they expect to raise rates two more times this year.  

Although mortgage rates are seeing their highest levels in four years, they remain at slightly over half of their 50-year average of 8.25 percent, making this an excellent time for you to get a mortgage loan. 

Monthly principal and interest payment based on a loan amount of $300,000 and the impact of a one percent increase:

Loan Amount $300,000
Interest Rate Increase 4.5% TO 5.5%
Increase to Monthly Payment $1,703 - $1,520 = $183
Annual Monthly Payment Increase $2,196
Additional Cost Over 30 Years $65,880

Estimated Payment based on Interest Rate

INTEREST RATEPRINCIPAL / INTEREST PAYMENT
4.500%$1,520
4.625%$1,542
4.750%$1,565
4.875%$1,588
5.000%$1,610
5.125%$1,633
5.250%$1,657
5.375%$1,680
5.500%$1,703

What about the cost vs. value of remodeling?

Remodeling can enhance your home’s value, from exterior updates that increase curb appeal to updated and/or expanded interiors that you’ll enjoy—and that will pay off when you do choose to sell your home down the road.

These enhancements will increase the value of your home at different levels based on the real estate market and client demand. Here are the top five projects with the greatest ROI (Return on Investment) from Remodeling magazine’s Cost versus Value 2018 Report.

Average Cost vs. Resale Value of Home Enhancements

ENHANCEMENTAVERAGE COSTAVERAGE RESALE VALUE
Manufactured Stone Veneer (97.1% ROI) $8,221 $7,986
Entry Door Replacement (Steel) (91.3% ROI) $1,471 $1,344
Deck Addition (Wood) (82.8% ROI) $10,950 $9,065
Siding Replacement (76.7% ROI) $15,072 $11,554
Minor Kitchen Remodel (81.1% ROI) $21,198 $17,193

Considering a new home or remodel?

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1. EQUAL HOUSING LENDER

2. This content is provided for informational purposes only, is not intended as an offer or solicitation. Alerus Financial, N.A. and its affiliate subsidiary company make no representations or warranties as to the accuracy, completeness or timeliness of the information. The information is not intended to provide legal or tax advice. Individuals should consult a qualified legal or tax advisor for advice specific to their circumstances.

3. Source: RSImedia.com

4. Tables are included for informational purposes only.

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