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

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