While none of us have a crystal ball that assures us of future numbers, we often rely on consensus projections compiled by Market Analysts to determine when to take action. When it comes to buying a home, there are two major numbers to consider:
- The Purchase Price of the home
- The Interest Rate on the mortgage you acquire (assuming you are not paying cash for your home)
With these two numbers in mind, consider the following nationwide projections (as provided by www.MortgageCoach.com)
If indeed we are to experience a 4.3% appreciation rate in property values, consider the following numbers:
- A property which can be currently purchased for $500,000 would cost $512,500 one year from now (a difference of $12,500)...and even more in future years.
If mortgage interest rates climb to 5.300%, consider the following impact over a 30 year period:
- On average, today's 30 Year Fixed rates can be estimated at 4.500% (4.612% APR)
- Assuming you buy the above-referenced home today at $500,000, and invest a down payment of 20%, you would acquire a loan amount of $400,000
What are the payment differences (principal + interest) between 4.500% and 5.300% over a 30 year period?
- 4.500% = $2,026.74
- 5.300% = $2,221.22
- Monthly Payment Difference = $194.48
- 30 Year Payment Difference = $70,012.30
Considering both factors in this example, there is a true "cost of waiting" to buy a home of $82,512.30.
The above example has been created to help Homebuyers understand the potential costs of waiting to purchase a home. Unfortunately, the market will continue to move regardless of whether a Buyer is contemplating a home purchase. It is important to understand the potential "bigger picture" of how these numbers are correlated when making such a significant purchase.
For additional information about financing and/or to be referred to a local Realtor in your area, please feel free to contact me.
(Fine print to keep our Compliance & Legal Officials happy)
The above examples are based on projected interest rates and property appreciation statistics. None of which are guaranteed to occur in your particular situation given the variables involved in qualifying for a home mortgage, fluctuating interest rates, and unpredictable property values. The payment numbers were based on Principal + Interest projections, for a $400,000 loan amount, 80% LTV, with 741 FICO. This post is not an offer to lend money, nor is it an assurance that all Applicants will be approved. Additional disclosures & identifiers appear below.
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