San Diego Real Estate, Rancho Bernardo Poway homes, George Cooke

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

The media is full of stories about the real estate "bubble". 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
(858) 692-3330
PHH / Coldwell Banker Home Loans

Copyright© 2008 George Cooke. All rights reserved. The content of this site is believed to be accurate but not guaranteed.
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