But Really, Is It Time To Buy? Part Two

Last blog I went over what a raise of just a couple of percentage points could do to a mortgage payment. This time I would like to show another perspective.

Maybe you are waiting for the prices to drop a little further. Maybe you have found the home you want and you are trying to get the seller down a little further, just another $10K or so. Let’s look at what this could save you and what it could cost you.

Using the same $300,000.00 loan as the model, we know that if interest rates rise 2% it will increase the loan payment approximately $500.00 per month. By waiting to get a better price you already know you run this risk. But what if you can get another $10K off the price? Now on a mortgage amount of $290K, your payment (same parameters) will be $1738.79. You will save $60.00 per month. This is great unless the rates go up. If they go up to 8%, the payment on $290K will be $2127.92 or an increase of $329.27 per month. So you saved $10K but are still paying more per month than you would have if had purchased at $300K.

Here is another scenario: Interest rates go up and you decide you better buy before they go up even more. Now there is another glitch. Because the same mortgage amount now costs more, you may not qualify for the same home. Banks are being very careful with their lending practices these days. The lines of who qualifies and who almost qualifies are not being blurred any more. Hopefully the banks have learned a lesson about this! Not being able to qualify for the same loan amount can mean you lose the home you had your heart set on. It can also mean that you now need to go to another neighborhood to find a home you do qualify for. This may not be a bad thing, but it may certainly be disappointing.

So, is it really time to buy? There are great prices and really great interest rates right now. No one can see into the future and know what prices and rates will be in a month or a year. I guess it all boils down to how much you want to gamble with the biggest purchase most people ever make!

As always, to check out real estate on Hilton Head Island without any obligation, check out my website at www.KatGardner.com. Please contact me with any questions or comments at Kat@KatGardner.com or give me a call at 843-422-3381. I am always available to talk about life in the Low Country!