Don’t wait to buy real estate…
There is an old adage that says “Don’t wait to buy real estate. Buy real estate and wait.”
It is as true today as it ever was! Interest rates have ticked up and prices have slowed and in some cases even had slight declines.
But Bob, If I wait my payment will be lower! Absolutely true. But, that is not the whole equation. Follow along with me.
I cannot predict future prices or interest rates but here are some thoughts. If you buy a home today that requires a $400,000 mortgage and a rate of 6.6% the 30yr payment is about $2555per month. Lets assume you wait until rates drop to 5%… the side effect is that prices will go up. Assume 2-3 years from now we get back to that 5% rate but by then prices have gone up 10%. ( A 10% price increase over 3 years is a reasonable assumption in metro Atlanta. When rates were super low we were seeing 10+% appreciation per year). Your down payment requirement will be 10 more than today AND and the remaining mortgage would be $440,000. At 5% interest that larger mortgage would have a lower monthly payment of @$2362.
But here is the flipside and here is why to buy today! Over those 3 years you pay an extra @$7200 in payment but gain $40,000 in equity!!!!! If you take that 1 step further and refinance when the rates hit 5% your monthly payment drops to about $2147. So for the rest of the remaining term of the loan your payment is $400 less than your original and $200 less than if you purchased later AND the $40,000+ equity gain is still all yours!
All of this does make some simple, but I think fair, presumptions.
But my point is still the same. “Don’t wait to buy real estate. Buy real estate and wait!”
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