Buy a Home Now and Save Money or Wait and Save Money???
You may be thinking, "That can't be!" and you know what? You're exactly right.
If you're one of the majority of people who need a mortgage to buy a home, you can't save money by waiting. It's as simple as that. If the market was in a tail spin and we were loosing 20% a year then I could see that logic. However, most economists who are predicting a decline in market values are thinking along the lines of a 5% drop.
Of course any drop is significant and something to be feared, right? Well, maybe not.
For those of you paying cash for your home this post doesn't apply. You want to get the best/lowest deal and if you think you should wait to put down your hard earned $375,000 on a home then you could be right.
For the rest of us though, there's this pesky little step called financing. A large part of financing is your interest rate. Let's take a look how that could affect your long term economic health:
Currently, if you buy a $375,000 home and put 20% down at the current rate of 4%, your monthly payment for principal and interest will be about $1,431. Over 30 years you'll pay a total of $515,607 with $215,607 being interest.
NOW, if you wait and home values drop by 5%, that same home is worth about $355,000. You just saved some money!!! Maybe but what if the interest rates are around 6%? "Oh, they'll never be at 6%!" you say. In case you can't remember as recently as 2008 they were above 6%, which is still historically low.
Now you put 20% down and due to that 6% rate your monthly principal and interest payment is about $1,704. Over the next 30 years you'll pay a total of $612,982 with $328,982 being interest.
WOW, so by waiting you saved $20,000 but you spent about $97,000 more in interest over 30 years. By my math you died the death of a thousand cuts to the tune of $77,000.
By the way... if you invest that extra $273 per month that you save buying now and get a measly 8% return compounded over 30 years, you'll have an additional $318,000!
Still think you can save money by waiting? Think differently!
Contact me at www.NateGerard.com for more information or to have me plug in YOUR numbers.