What if I Wait to Buy a House?

    As the real estate market it so hot and people are starting buy instead of rent. You might think, “Should I buy now or wait one year?” You might see a lot of your friends and family buying now. You might think that it would be a good idea to wait to save for a bigger down payment (even though there are programs for no down payment, FHA loans at 3.5% down, and conventional loans for 5%) or maybe pay off some more debt. Here is why all the housing experts say to buy now and not wait.

    The Cost of Waiting to Buy is defined as the additional funds it would take to buy a home if prices and interest rates were to increase over a period of time. Let’s look at an example of what the experts are predicting for the upcoming year, and what that really would mean for you. Let’s say you could afford and want a house that costs $250,000 today. Right now mortgage interest rates are at or about 4%.

    Your monthly mortgage payment (principal & interest only) would be $1,193.54.

    If you think you are too busy, or you like your apartment, and moving is such a hassle that you decide to wait until next year to buy you might be in for some pain. CoreLogic predicts that home prices will appreciate by 5.1% in the next 12 months; this means that same house you loved now costs, $262,750 (if you bought at $250k you would gain that in equity). Freddie Mac predicts that over this same period of time, interest rates will be a full point higher at 5.0%. Your new payment per month is now $1,410.50.

    The difference in payment is $216.96 PER MONTH!

    That’s basically like taking $8 and tossing it out the window EVERY DAY! Or you could look at it this way:

    • No more going out to lunch
    • There goes Friday Sushi Night! ($50 x 4)
    • Stressed Out? How about a few deep tissue massages with tip!
    • Need a new car? You could get a brand new car for $217 a month.

    Let’s look at that number annually: Over the course of your new mortgage at 5.0%, your annual additional cost would be $2,603.52! There goes your vacation you wanted to take. Or the update your house. We could come up with 100’s of ways to spend $2,603, and we’re sure you could too!

    How about the life of the loan. If you take all 30 years to pay off that loan (assuming you don’t sell, rent it out, or pay it quicker) you would have spent an additional $78,105.60, all because you wanted to wait one year. 

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