I'm Going to Wait Until ..... (Part Four)

By
Real Estate Agent with Berkshire Hathaway Home Services McNelis Group Properties

I'm going to wait until..... (Part Four)  This is the fourth of a series on the cost of waiting to buy.For those thinking about waiting, please consider this if prices increase:

Using a sales price of $312,500 that runs in the range of recent Calvert County monthly averages and a loan amount of $250,000 (80% LTV for a conventional loan), the mortgage payment at 4.5% for 30 year fixed, with $3000 yearly taxes, and $600 year insurance, the payment is $1566.

If the interest rate moves up just .25% to 4.75% and home prices increase 2.5%, in this case to $320,312, a very modest increase, the loan amount becomes $256,000 and the payment at 4.75% will be $1638.80.

 When considering an average time a home is typically owned over 7 years, with a .25% rate increase and a 2.5% home price increase, it will cost the buyer:

-Another $72 per month in mortgage payment, a total of $6115 for the 7 year period. Some might say that the actual sales price increase is $7812 and that due to the buyer not typically holding the property for 30 years is "spreading out" the price increase, but the facts are that during a 7 year period, the buyer is going to directly absorb 78.27% of that price - 1.9567% of the 2.5% increase directly absorbed by the buyer.

-If the buyer holds the property for 30 years, that 2.5% increase will end up costing the buyer 10.56% more.

For more information on the Cost of Waiting to Buy:

I'm going to wait until ..... (Part One) http://activerain.com/blogsview/1883689/i-m-going-to-wait-until-part-one- 

I'm going to wait until ..... (Part Two) http://activerain.com/blogsview/1883901/i-m-goint-to-wait-until-part-two-

I'm going to wait until ..... (Part Three)http://activerain.com/blogsview/1883988/i-m-going-to-wait-part-three- 

I'm going to wait until ..... (Part Four)http://activerain.com/blogsview/1884026/i-m-going-to-wait-until-part-four-

 

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Comments (2)

Robert Rauf
HomeBridge Financial Services (NJ) - Toms River, NJ

That extra $72/mo will also buy you about $15,000 more house TODAY. 

the only people that should wait are the ones that know they will not stay in a home long term.  If you will be there for 5 years, BUY BUY BUY!  but if you are going to move in a year, it will be hard to show that that makes sense.

Sep 28, 2010 09:59 AM
Susan Thompson-Solomons
Berkshire Hathaway Home Services McNelis Group Properties - Solomons, MD
Southern MD Real Estate-Solomons Specialist

Robert, you are very right. This four part series is intended to show the numbers. There may even be cases that could be made for less than 5 years depending on how quickly rates rise or prices rise and the local market - probably not a year though, and most people wouldn't be looking to buy knowing they were going to sell in a year or two.

Sep 28, 2010 12:05 PM