When considering the purchase of a new home, many potential buyers take a “wait and see” approach. In some cases, they want to wait for interest rates to fall, while in others, they are waiting for the overall prices of homes to go down.
This leads to an interesting question – which is better? Wait for a lower price or a lower interest rate before taking the leap to purchase?
The answer is – neither.
For those who truly want to purchase, it’s really never a good idea to wait. Otherwise, your ideal home could get away from you. There are, however, some tips to go by when it comes to opting between prices and potential mortgage rates.
First, the prices of homes overall have actually been rising for the past several years. In fact, between January 2014 and January 2015, U.S. home prices rose more than 6% – and the upward trend is expected to continue. This means that if you’re considering making a purchase, you could start to accumulate a nice amount of equity within a relatively short period of time.
A rising interest rate, on the other hand, can make a substantial difference – both in the amount of your monthly payment, as well as the amount of interest that you pay throughout the overall life of the loan.
For example, a home with a purchase price of $200,000 and a 30-year fixed rate mortgage of 4% will have a monthly payment of $955. If that same home is purchased with an interest rate of 4.5%, the monthly payment will jump up to $1,013 per month.
Although $58 per month may not seem like a big deal, it can add up, because over one year that equates to $696 – and over a 30 year period of time it equals nearly $21,000 more in interest.
Having a real estate agent on your side can help you to negotiate price on a home you’re purchasing. If you’re ready to make a move, but not sure whether it’s the right time, give us a call. We can help you to get the answers you’re looking for so that you are ready whenever the time is right.