I hear Buyers say all the time, “I think I will wait”. Well there is a cost to waiting, whatever the reason whether it is for: more inventory, lower prices, better weather, kids to get out of school, etc, etc. Whatever the reason is that you are waiting, please be advised that there is a cost associated with the wait. Let me explain.
Say you were thinking about buying a home back in October of 2016 but decided to wait for the elections to be over and see who was going to be the next president of our great country. That makes logical sense; we should be concerned about the political climate in our country. Well let’s take a look at what that means.
Say the home you were looking at was $350,000 and you were going to put 20% down on this home and finance the remainder. The loan amount for this scenario is then $280,000. Interest rates at that time for a 30 year fixed rate were right around 3.625% which would put your estimated monthly P.I.T.I. payments (principle, interest, taxes and insurance) at $1,706.11. If we look at five years from now, you would have paid on your loan, principle and interest payments to the tune of $80,616.40.
Now let’s look at the same scenario if you were to purchase that home today after waiting just five months. Same house, same price except now interest rates have moved up slightly to 4.375% for a 30 year fixed loan. That’s less than a one percent increase in interest rate but watch what happens when we break it down. The estimated monthly P.I.T.I. payment is now $1827.17 and over the same 5 year period your principle and interest payments would have added up to $87880.00. So, right away we can see that this impacts your monthly cash flow by roughly $120 a month, not much but that is a couple of bills that could be paid and over 5 years you would have spent an additional $7,263.60 in mortgage payments.
Let’s look a bit into the future with the same thought process. Let’s say that by the end of the year interest rates go to 5% on the same 30 year fixed rate loan. If the home prices have not increased (a whole different ball game there), then that would make your estimated monthly P.I.T.I. payment $1,932.27 and over a 5 year period that would equal $94,186.00. Your monthly cash flow has increase by a whopping $226.16 which could be a car payment or at least several bills and over a 5 year period you would have spent an additional $13,569.60 in mortgage payments.
So factor in that home prices are going up it will only cost more to wait on that home purchase. Call me or text me at 530-306-3494 or email me at firstname.lastname@example.org if you or someone you know are thinking about purchasing a home. I would love to help.