Mortgage interest rates have fallen again to 38 year lows. BELOW 5% for many. What does this mean to you?
Example A : As a New Buyer... When is paying $200K better than paying $180K?
If you mortgaged $200K at 4.98% interest (quoted rate today), 30 yr loan.. the P&I payment is $1067/mo -- BUT... what if prices go lower?? Let's say the price fell to $180K but the interest rate went up 1.5%... (still low historically). That $180K mortgage at 6.5% would cost you $1131/mo!! $64 MORE than if you'd bought at $200K and 4.98%....
So, buying at $200K can cost you LESS than buying at $180K due to the interest rate! If you are thinking of buying this year. NOW may be THE MOMENT. Prices are low, interest rates make the payment even LOWER.
Example B: Moving up to a bigger, better home. Why NOW?
Let's say you bought 8 years ago and your home value went way up and has come back down again... you're thinking... I'll wait until it goes back up to buy the next home. That COULD be a mistake....
Let's say you have $125K equity left in your $250K home... And the house you want to buy is down from $450K to $395K.
Your interest rate on the home you bought is still at 8% and your payments are about $1167/mo... If you buy the new home at $395K and put your $125K down your payments are $1440/mo. For $273/mo you can have the bigger better house NOW!
If you waited for your home to rise 15% to $287,500... sounds good, right? But that home you could have bought for $395K now is up 15% too... or up to $454,250. You gained $37,500 on the wait on the sell end, but lsot $59,250 on the buy end! Not good math. BUT, if you did it NOW, then YOU would be the one GAINING that $59K in equity when the market rises on the bigger better house!
Does that make sense? Let me know if I can help or answer any questions: donna.stott@mac.com
For those interested in GOOD NEWS about Real Estate - the facts with a Positive Spin!
1 comment:
This is GREAT!Thanks for doing the math. This question comes up in my Financial Advisory practice. Just yesterday, matter of fact. The discussion started with what to do even when you are upside down on a property. I have wondered about this frequently in relation to my our own real estate and it helps to see that it actually does work. By the way, Donna, thanks to you and Mike for your caution to me a year and a half ago not to buy too early on an auction property in my neighborhood. Such properties are moving $150,000 below the auction price back then. Your 25+ years experience is sure valuable. You have become a trusted friends and advisors. We are still quite happy with our Hawaii purchase directed by the expertise of the Stott Team. Being in the right neighborborhood has given me comfort that our value is holding well. Many thanks. Garry Michaelis, Phoenix
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