What Is The Cost of Waiting?

By
Mortgage and Lending with Stearns NMLS #232164 CA BRE #01380812 BRE 01380812 NMLS 232164

What Is The Cost of Waiting?

 

Did You Know The Average Mortgage Interest Rate Over The Last 20 Years Was 7.44%?*

Most experts agree that mortgage interest rates will rise from their current historic lows. 

Taking the historical average into account, buyers should be aware of how rising interest rates effect affordability.

 

Cost of Waiting graphic

 

The example above illustrates how a rise of 1-2% in an interest rate lowers a buyer’s buying power. 

The numbers will change slightly when property tax and insurance is added to the mix, but this illustration helps buyers understand how rising rates impact their buying power.

 A 1% increase in the mortgage interest rate will lower a buyer’s purchase price affordability by just over 10% on a conforming jumbo and jumbo loan. 

A 2% increase in the mortgage interest rate will lower a buyer’s purchasing power by over 19%.

When rates rise, fence-sitters are likely to race into the market, which may add to price inflation, making matters worse for buyers.

Even if values drop after a home purchase, most buyers would still benefit from the mortgage interest and property tax deduction compared to renting.  That's another analysis you should be looking at if you're thinking about buying a home.

Facts are friendly and it pays to run the numbers!

A good lender can show you how to get the seller to help you lower your interest rate.  The Seller Buydown Strategy is used by saavy Realtors and lenders.

*Conforming historical rate average is based on a Bankrate.com survey of annual average interest rates. These are not rate quotes, they are examples based on one set of criteria.  Some numbers have been rounded off for illustrative purposes.

If you're meeting me for the first time, check out my music video business card: Queen Of The Loan

and Listen to Past Episodes of my Clear Channel Radio Show Here: Tea Time With Queen of The Loan.

Posted by

close

This entry hasn't been re-blogged:

Re-Blogged By Re-Blogged At
Topic:
Mortgage / Finance
Groups:
Mortgages
Bananatude
Tags:
cost of waiting rising interest rates wait to buy a house

Spam prevention
Show All Comments
Rainmaker
796,772
Robert Rauf
HomeBridge Financial Services (NJ) - Toms River, NJ

if you look back at a 40yr average it is even more enlightening.. over 9% for the 40yr average... We are SO spoiled right now, but no one believes it.

Jul 28, 2011 06:57 AM #1
Rainmaker
1,441,463
Joe Manausa
Joe Manausa Real Estate - Tallahassee, FL
Tallahassee Real Estate

Of course, the flip side is when rates do go up, won't that bring down home values due to lowered affordability?

Jul 28, 2011 06:59 AM #2
Rainmaker
53,782
Mary Anne S. Daly
Stearns NMLS #232164 CA BRE #01380812 - Mill Valley, CA
Queen of the Loan & Radio Broadcaster

You're right Robert.  We are spoiled in that way.

Tallahassee guy, that will happen eventually, but in the short term, I think as fence-sitters jump off, at least in my neck of the woods, prices may go up as those who were waiting feel panicked and decide to stop waiting.

Jul 28, 2011 07:19 AM #3
Anonymous
Elise Groves

Great info from the Queen.  I don't think enough people realize just how much a rate increase will affect their ability to really get the home they want.   Get these buyers off the fence!

Jul 29, 2011 04:55 PM #4
Rainmaker
796,772
Robert Rauf
HomeBridge Financial Services (NJ) - Toms River, NJ

Rates will not go up significantly until there is sustainable growth and inflation (answering Mr Tallahasse Guy) so actually if rates are going up housing prices should be going up as well.

Aug 01, 2011 08:31 AM #5
Rainmaker
53,782
Mary Anne S. Daly
Stearns NMLS #232164 CA BRE #01380812 - Mill Valley, CA
Queen of the Loan & Radio Broadcaster

Robert, you are probably right, now that the debt ceiling crisis seems to have been averted.

Our economy must add 391,000 jobs per month to lower the unemployment rate by 1%.  Only 18,000 jobs were created in June, 2011.  That's quite a gap.

Thanks for your comments.

Aug 01, 2011 07:27 PM #6
Rainmaker
796,772
Robert Rauf
HomeBridge Financial Services (NJ) - Toms River, NJ

I agree, Jobs are the key- especially since our economy is 70% consumer based.

Aug 02, 2011 06:58 AM #7
Show All Comments

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?

Rainmaker
53,782

Mary Anne S. Daly

Queen of the Loan & Radio Broadcaster
Ask me a question
*
*
*
*

Additional Information