Buy Now Vs Buy Later

Real Estate Agent with eXp Realty
If your waiting or the market to decline some more before buying that new home, you might also want to consider what effect the interest rates will have on your payment. Take a look at this scenario for something to think about.

If you're sitting on the fence and thinking about whether to buy a house now or wait and see if the market keeps declining this might interest you. You see even as the market goes down and interest rates rise you may save money by buying now. Let's look at somebody buying a $300,000 home. Let's assume they're getting an FHA mortgage with 3% down payment. That would bring the loan amount to $291,000 if we use a 5% interest rate, for a 30 year loan your monthly payment for principal and interest would be $1,562, add taxes, insurance, and PMI which is mortgage insurance and your payment would be $2,062 a month. If you wait till the market drops so the price of that same home comes down $10,000 that make the sale price $290,000 for the same FHA loan at 3% down the loan amount would be $281,300 now let's assume the interest rate goes up 1% to 6%. Your payment then becomes $1,686 with taxes insurance and PMI the payment becomes $2,170. Interesting, buy now and you would save $124 month, over a five-year period it adds up to $7,440 and over the 30 year life of the mortgage you would save $44,640. Just something to think about.

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Mike Wong
Keller Williams Realty Southwest - Sugar Land, TX
Realtor: Commercial, Residential, Leasing, Invest

Great visual Michael, this is something every home buyer needs to be aware of. I explain this to all of my clients to get them off the fence and unfortunately some of them did not listen and got caught when the rates moved up and they HAD to buy because we were at their deadline.

May 21, 2011 09:36 AM #1
Steven L. Smith
King of the House Home Inspection, Inc. - Bellingham, WA
Bellingham WA Home Inspector


It seems to me like there are lots of people getting off the fence these days. I am just treading water, so many calls.

May 21, 2011 03:30 PM #2
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Michael Eisenberg

Bellingham Real Estate Guy
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