State prepares record-low mortgage rate to spur home sales
A record low mortgage interest rate introduced today by the Department of Community Affairs and the New Jersey Housing and Mortgage Finance Agency will boost the state's real estate market and drive economic recovery in time for the spring homebuying season, agency officials and industry leaders said.
According to HMFA executive director Anthony Marchetta, the agency will lend $170 million at a 30-year term fixed interest rate of 3.75 percent, reduced from 4.25 percent, to fund approximately 1,000 mortgages.
"This is the lowest rate the HMFA has ever published, and we think it will drive a lot of people who are not even contemplating home ownership into buying a home," said Richard Constable III, acting DCA commissioner and HMFA chairman. "There are a lot of foreclosures out there, so we're hoping that this low-interest mortgage rate will stabilize the real estate market."
In addition to the fixed rate for first-time homebuyers, the HMFA introduced 30-year term mortgage interest rates below 3 percent for members of the Police and Firemen's Retirement System, the lowest the agency has ever offered in the state.
According to New Jersey Association of Realtors CEO Jarrod C. Grasso, real estate accounted for 22 percent of gross state product in 2010, and for every eight existing homes sold in the state, one new home is built, generating $36,388 throughout the state economy.
"With these new rates, owning a $229,000 home with a 100 percent mortgage will cost an astonishingly low amount, comparing or beating the rental price for a similar size home," said Michael Fink, president and CEO of Leewood Real Estate Group New Jersey LLC. "What's important for people in this state is that if they buy, not rent, a home at this interest rate, when they sell it for the same price at the end of 15 years, they will walk out with $70,000 in savings. For a first-time homebuyer with a modest income, where else could you save that much in tax free money in that time? Nowhere."
According to Fink, the state will benefit from the sales tax generated from the products needed to build new homes, as well as the income tax from job creation in construction and other fields.