Have you been on the fence about buying a home? Are you still running the numbers in your head to discover exactly when the right time will be? Here are a few things to consider if you’re just not ready to start shopping.
Interest rates are holding steady, but all eyes have been on the Fed over the past few months. Many analysts think an interest rate hike of 0.25% at the December FOMC meetings is likely. Mortgage rates overall have been in a relatively tight range so far this year, and the last time the Fed raised rates it was in December of last year.
Let’s look at a $350,000 purchase price with a 20% down payment and a loan amount of $280,000. An increase of just 0.25% on a 30 year loan would mean nearly $475 in higher interest charges in just the first year alone and $2,375 over five. No one is certain what the Fed will do in December, but we do know the impact of an interest rate hike of just 0.25%.
Okay, let’s say the Feds stay put. But what about property values? According to the Austin Board of Realtors, the median home price of homes in the greater Austin area rose by 7.5% just over the past year. That $350,000 home would then be closer to $376,000, or $26,000 more. The most recent data also shows the inventory of homes is at 2.7 months—still very much a seller’s market.
Now let’s look at what would happen by combining both a rate increase and a $376,000 price for the very same home. First, you would need $5,000 more for your 20% down payment. Second, the loan amount is $300,000 and the monthly payment for the next year is $1,549 more and around $7,750 over the next five years. The cost of waiting? It’s the higher down payment and higher monthly payments.
If you did buy that $350,000 home and financed today, not only would your payments be lower compared to an interest rate increase of 0.25%, but you also enjoy the increase in homeowner equity over the first year of $26,000.
We know these numbers are not set in stone, but based upon current data and industry expectations.
If you’d like to have us run some numbers for you, shoot us a message and we’ll put together a custom plan for you.