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George Cooke
Realtor(R)
CalBRE # 01435275
Coldwell Banker
Residential Brkrg.
 
(858) 674-1222
 
 
www.RBlistings.com
 
www.GeorgeCooke.com
 
 

Should I Buy Now or "Wait for Prices to Come Down"?

The media is full of stories about real estate "bubbles". What happens if prices do come down but interest rates resume their upward climb?

Here is an example of one scenario:

The price drops from $500,000 to $450,000 but the interest rate goes up by 1%
What does this do to your monthly payment?
Was it worth the wait?
    5 Year Fixed   5 Year Fixed
    Interest Only   Interest Only
         
Purchase Price   $500,000   $450,000
Down Payment 10% $50,000   $45,000
         
Loan Amount-1st 80% $400,000   $360,000
Loan Amount-2nd 10% $50,000   $45,000
         
Loan Rate-1st 5.25%   6.25%  
Loan Payment Int. Only $1,750 Int. Only $1,875
         
Loan Rate 8%   9%  
Loan Payment Int. Only $333 Int. Only $337
         
Property Taxes 1.25% $521   $469
Insurance $600/Yr $50   $50
HOA Dues   $0   $0
    ======   ======
    $2,654   $2,731
         

The monthly mortgage payments will be $129 higher.
Even considering a lower property tax assessment, the monthly payment goes up.

A 10% decrease in price is offset by a 1% increase in financing costs, even with a lower tax assessment! Today's interest rates are still excellent and inventory offers the best selection in years. Why wait?

The same scenario applies to larger transactions also!

    5 Year Fixed   5 Year Fixed
    Interest Only   Interest Only
         
Purchase Price   $1,000,000   $900,000
Down Payment 20% $200,000   $180,000
         
Loan Amount-1st 80% $800,000   $720,000
         
Loan Rate-1st 5.5%   6.5%  
Loan Payment Int. Only $3,667 Int. Only $3,900
         
Property Taxes 1.25% $1,041   $938
Insurance $1,200/Yr $100   $100
HOA Dues   $0   $0
    ======   ======
    $4,808   $4,938
         
These examples were provided courtesy of Jim Kubicka, NMLS # 268849
(858) 692-3330
First Capital Mortgage Company
 
Copyright© 2008,2013-2017 George Cooke. All rights reserved. Site content is believed to be accurate but not guaranteed.
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