I recently had a client miss out on a chance to buy a home that they really liked. Naturally, they were disappointed, and in their case the loss actually caused them to consider stepping out of the market. They were thinking maybe this was a sign they should wait a couple of years to purchase.
I wanted to illustrate what that could mean for them, so I did a bit of analysis of the financial impact waiting could have. Right now, interest rates are quite low- the day I pulled them they were at 4.25. That meant that for a $175,000 house, payments would be $860.89 plus taxes & insurance. Total cost of the 30 year loan in this case would be $309,922.13.
I haven’t heard of anyone who assumes that rates are going to stay this low. In fact that 4.25 rate is already higher than what they were this summer.
Should interest rates rise to 6% that same $175,000 house would require monthly payments of $1,049.21 plus taxes & insurance. This time, total cost of the 30 year loan would be $377,716.83.
This means that purely by waiting, the same loan could cost this buyer $67,794 dollars MORE over the life of the loan.
Just think what you could do around the house with that kind of extra money!
To see what $175,000 can buy right now in my area, click on this link. http://www.cbgreatlakes.com/Search/72735