Interest rates stable for now, but what does the possibility of an increase in mortgage interest rates mean for you in 2015?

Interest rates are at a historic low, and in a recent press conference, Federal Reserve chair Janet Yellen indicated that the Fed may not raise interest rates until later this year, possibly sometime in the summer.

Interest rates were cut to almost zero in December 2008, and an effort has been made to keep rates low in hopes of stimulating the economy. 

Any change in policy would be dependent on economic data of course. 

You might be wondering what all this has to do with you. In truth, interest rates affect everyone of us, but they are of special importance to potential homebuyers (and those wishing to refinance, for that matter). 

Quite simply, lower interest rate means less money paid out by the borrower to the institution lending the money, especially over the long-term. 

I decided to do a quick calculation of what one might borrow for a mortgage, say $250,000, so I logged onto mortgagecalculator.com. You can do the same and play around with some numbers.

As is illustrated with my plugging in $250,000, one half of a percent can be significant.

Borrowing $250,000 over a 30-year period at 4.5% can save over $27,000 (this does not include points, closing costs, etc., however) over the same loan borrowed at 5%. 

As you can see, a seemingly small difference in interest rate can save, well, a lot of your hard earned money. 

When it comes to mortgages, it does pay to shop around and know your options. But one thing is certain: with the Fed possibly raising interest rates sometime in 2015, it is smarter to purchase sooner, rather than later. 

Below is the news conference from mid-December. Yellen's remarks about interest rates can be viewed at about the 30:00 mark. 

   
Chris Glahn is a licensed Realtor in the state of Michigan with RE/MAX Platinum Ann Arbor. He can be reached at 734-730-3403.