This post first appeared in the February 2009 edition of Cirios Trends.

Record low mortgage rates are all over the news these days, as we’re once again flooded with advertisements telling us its a great time to buy a house. Keeping interest rates low represents the frontline in the government’s assault on the housing market’s continued woes. These low rates sound great, but what do they really mean in terms of dollars and cents?

Let’s say you’ve got your eye on a $500,000 house and can pony up a $50,000 (10%) down payment. Last August, mortgage rates were as high as 6.5%, which translates into around $2850 in monthly payments for your $450,000 loan.

Current rates are running as low as 4.5% for qualified buyers, which would lower your monthly payment to $2280: A savings of $570 per month.

Further – and this gets to the root of why the government is pushing rates as low as they can – for that original $2850 payment, your new and improved 4.5% rate would get you into a $600,000 house. So that 2% lower rate increased your effective home purchasing power by 20%. Don’t forget, however, that your 10% down payment also increased by $10,000, and taxes, insurance and upkeep would all rise as well.

A lower interest rate also means more of your monthly payment goes towards paying back your loan principal (look for next month’s article explaining how mortgage payments are calculated). After 10 years, that lower rate means you’ve accumulated $20,000 more equity than you would have had with the higher rate loan.

Add this $20k to all those lower monthly payments and that means if you held onto your house for 10 years, you’d save $80,000. The numbers are even more staggering if you go the whole 30 years on the loan, with a combined savings of over $200,000.

So, does all this add up to it being time to buy a house?

Probably not.

Keep in mind that home prices are still in a decidedly downward trend, and government-led home buying efforts are just getting started. There just isn’t any rush to buy. For those currently renting, it’s probably best to keep at it, save up for a bigger down payment and determine exactly what you can afford before jumping into the house search.

Of course, staying tuned to ciriosre.com will help you stay up on the latest market trends. So will the soon-to-be released Cirios Rent vs. Buy Calculator.