Sure, you want to get the best deal possible. Unfortunately with the housing market that’s not always easy. You want market prices and mortgage rates low. While you may want to wait until the perfect market time to buy your new home, there are some things you should consider.
Certainly you can tell from recent trends whether or not prices are in your favor. Monthly prices have risen year-over-year for three years. You could wait for prices to fall, but it would take an economic recession to lower prices. It could take years for another recession and you will not know what position you will be in at that time. You may no longer be ready to purchase a home. This means all the equity you could have built up, doesn’t exist.
Mortgage interest rates have been kept artificially low for five years. That’s a very long time. With steady gains in employment, it’s not likely they will go any lower. In fact, higher interest rates could wipe out any gains you could save by waiting to buy. We are currently seeing a trend of them moving higher.
Here’s a real life example provided by Realty Times:
If you buy a home and get a $200,000 30-year, fixed-rate mortgage at 4.5 percent, your monthly payment will be $1,013.37 and you’ll pay $164,813.42 in interest over the life of the loan.
The same home at 5.0 percent interest costs $1,073.64, a difference of $60.27 more per month and $186,511.57 in interest over the life of the loan. The difference in interest payments alone is $21,698.15.
If your home dropped 5% in value and you were able to buy it at $190,000 and 4.5% interest, your payment would be $962.70, a difference of $50.67 per month, with $156,572.75 in interest over the life of the loan. You’d save $50.67 more per month than if you’d paid $200,000.
At 5.0 percent, your $190,000 home costs $1019.96, or $53.68 more per month than if you’d gotten the loan at 4.5 percent. Your interest payments would total $177,185.99 over the life of the loan. The difference in payments is $20,613.24.
Currently, mortgages for borrowers with good credit are around 4.00 percent. If you had purchased your $190,000 home a year and a half ago when prices were lower and interest rates were at 4.00% interest, it would cost you $907.09 per month and a total of $13,6552.06 in interest.
Remember, there’s never a perfect time to buy a home and you shouldn’t buy a home just for financial reasons. Buy your home to raise your family, be close to friends and relatives and to be free from a landlord where you get nothing back but cancelled checks at the end of the lease. Don’t put your dreams off to gamble with the market. Think of getting the home you want at a reasonable price and payment as the best way to beat the market. For more tips on buying a home call Helen today at 847.967.0022 or email [email protected].