Buyers: Like It Or Not, Waiting Is A Risk

Are you looking to refinance your existing mortgage?

Agents seem to always be saying "It's a great time to buy!" or "It's a great time to sell!" no matter what the market is like.  While it's important for us all to maintain a positive mindset in the face of adversity, it's just as important to know the facts about the Beach Areas real estate market so as to deal with it realistically.

The waiting game is interesting because for a while there are people who wait and wind up benefiting from it.  Other people see this and decide they're going to wait, too.  The problem is that it has to end sometime and the longer you wait, the more risk there is.  Just as the real estate "bubble" burst a few years back because the price limit had been reached, it seems we are now seeing signs that the bottom is being reached.

Which means there's nowhere to go but up.

If you have been playing the waiting game, I'm not here to pressure you.  I am here to give you solid information so you can make the best educated decision for your situation.  An article in the Wall Street Journal by Karen Blumenthal lays it out pretty plainly...

New loans are starting to get more costly.

The good news is that mortgage rates for 30-year fixed loans is holding on at around 5% if your credit is good.  The upward climb in rates appears to have begun, though, as Blumenthal states: "That (5%) is up about a percentage point from last year's lows but is still an attractive rate by historical standards, though expected to keep climbing as the economy improves.

To most people, one percentage point doesn't sound like much.  However, even half of a percentage point makes a huge difference.  For example let's look at a $300,000 property on a 30-year fixed rate loan.

If you have good credit and bought it with a 4.5% interest rate, your monthly mortgage payment would be $1,832.  Your final payback total if you stayed for 30 years and took 30 years to pay it off would be $659,720.

If you have good credit and bought it with a 5.0% interest rate, your monthly mortgage payment would be $1,922.  Your final payback total would also increase to $692,267.

Certainly there are many factors that are considered in mortgages, but just a half point on the interest rate alone makes a big difference.  While some have benefited from the waiting game, that's because they made their decision before the rates started to creep up.  Now that they're creeping up, don't expect a repeat of the historic lows of the past year.

In addition, Freddie Mac and Fannie Mae have added new loan fees to people with the best credit and raised existing loan fees.  Brokers are expecting the higher fees to lead to higher mortgage rates.  The phasing out of both Freddie Mac and Fannie Mae has also been proposed by the current presidential administration.

I agree with Blumenthal..."it may not be the perfect time to buy a home - but better mortgage options today may be a worthy trade-off to the possibility of lower prices tomorrow."  The two do have a way of evening each other out.  

To read the entire Wall Street Journal article yourself, click here.