I get the following questions a lot: "Is this a good time to buy?", and "Where are rates heading?". I don't know the answer to either of course, but let me know if you do please. I also think my answer is irrelevant because the common stance is: "I'll wait with my refinance until the rates go lower", or "I'll wait for the market to hit bottom before I buy (and I will also expect rates will stay low, or go even lower).
Anyway, I have an interest in these matters, so I engaged in some analysis which I thought I'd share with you. I hope you will find it interesting/useful. Contact me if you want me to crunch the numbers for you. Best... Paul
>The refinance question
What is the benefit of a refinance, factoring in the new lower rate, the refi expense , and time I expect to keep my property? Check my estimation table and calculators for a quick estimate. Please contact me if you want me to work out the exact numbers for you.
If you want to do more homework you can check Freddie Mac for current rates, historical rates here, and the Bankrate closing cost study for an estimate of closing costs.
>The purchase question
This is the tougher one. Ok, so what if we have hit the bottom, the economy improves, and rates go back up (or not)?
- What's the effect of an increase (or decrease) in property values on mortgage payments, assuming rates stay the same?
- If rates go up, at what price do I need to buy to keep payments where they are today?
In short: If property values remain the same, and rates increase by 1% you will be paying 8% more over a 10-year period, 17% more over a 30 year period" (at 95% loan to value). Or conversely, you'd need to buy at as much as 15% lower price to "break even". Here are some useful tables and a calculator to run your own scenarios. Please contact me if you want me to work out exact numbers for you.
If you want to do more homework you can check historical mortgage rates, and the Case-Shiller chart for real estate trends.
Bottom line: Consider the cost of ownership, not just the purchase price! It's a buyer's market now, you can hunt for bargains now and get financing at all-time low rates. Once things turn (and they will) the shoe will very quickly go to the other foot.
>The selling question
I will adddress this one seperately next week.
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