Lower Prices or Lower Interest?

Right now, home buyers have a lot of good things going for them. Though home prices have risen, they’re still below the 2005 bubble level, and mortgage rates are just above record lows. Yet it seems that many buyers are still waiting to decide if they should wait for lower prices, or waiting for lower interest. So, what should you do? Neither, you should jump on it now.

Why? Well, the price of a home is fixed, so it might make sense to wait for prices to go lower, but what you may not realize is that prices must drop significantly to beat even a minor fluctuation in mortgage interest rates. In truth, though they fluctuate, home prices have been increasing in the last five years, and in double digits. Between January of last year and January of this year, prices have risen almost seven percent. If prices continue this pace it’s more than likely that the house you may want now, may be more expensive later.

So I know that this is basic knowledge, and follows basic logic. So let’s look at something that’s a little more concrete, let’s look at the numbers. I like round numbers so let’s use a $200k 30-year, fixed rate mortgage at 4.00 percent. Starting today your monthly payment will be around $955. After seven years, which is the average length people live in their homes, you’ll have paid $52,898 in interest, and the remainder of your loan will be $171,738.

Of course, these numbers are hypothetical, but regardless, if you wait around and interest rates go up, you’ll be paying more monthly and you won’t be building equity as quickly. If you waited around and interest went up .5% to 4.5%, your monthly payment would be $1,013, and you’ll pay $59,828 in interest. Half a percent in increase will cost you 58 bucks more per month, and a whopping $6,930 in interest.

In the time you were waiting, you could effectively be building equity. Few homeowners actually keep a loan for thirty years. People change jobs, move up, get divorced, move down, refinance or just have other reasons to not keep their mortgage. The market isn’t going to wait for you, why wait for it?

So if you’re ready to take advantage of what I’ve just told you, be sure to stop by or call National Realty Group at 1-800-406-9606. We’ll be sure to set you up with someone who can answer all the questions you may have, and if you’re ready get you into the right home.