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2015-05-21 08:57:32
It Doesn't Pay to Wait to Buy a Home

it doesnt pay to wait to buy a home

there will always be those who try to 'time the market,' but theres one factor you cant know -- when buying a home will become more expensive.

certainly you can tell from recent trends whether or not prices and mortgage interest rates are in your favor. monthly prices have risen year-over-year for three years. mortgage interest rates are slowly rising, but remain at extremely attractive levels.

you could wait for prices to fall, but there are two problems with that idea. first, it would take an economic recession to lower prices, which could take months or years. with the exception of the great recession, you wont know if youre in or out of a recession until the talking heads online inform you.

second, mortgage interest rates have been kept artificially low for five years. thats a very long time. with steady gains in employment, its not likely they will go any lower. in fact, higher interest rates could wipe out any gains you could save by waiting to buy.

heres a real life example:

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 youll 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 ped 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. youd save $50.67 more per month than if youd paid $200,000.

at 5.0 percent, your $190,000 home costs $1019.96, or $53.68 more per month than if youd 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.

the question is -- did you?

theres never a perfect time to buy a home and you shouldnt 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.

dont 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. 

written by blanche evans



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