Now is the the time to buy.
Many people don’t realize this but with interest rates slowly creaping up and with house prices leveling now is the time to buy. Below I will show an example of why the fact that rising interest rates are as important as price when purchasing.
Ok so example time.
Two months ago a 30 year fixed rate mortgage through the USDA was at 5.5% interest.
Today you are looking at 7% interest.
Lets say you are looking to purchase a $250,000 home.
So if you had a Fixed Rate 5.5% loan to pay for the full $250,000 your payment would be $1,419 plus taxes and insurance.
The same loan at 7% interest would have a payment of $1,663 plus tax and insurance. So lets say you can only afford a $1,419 payment but you waiting until today to purchase. The $1,419 payment at 7% would mean you can now only afford a $212,000 dollar home.
By waiting you are losing 38,000 dollars worth of purchasing power.
If you have spent much time looking at homes in Cedar City you know there is big jump in the qaulity of homes from $212,000 to $250,000 dollars.
Here is another thing to look at. Over the life of the loan the guy who barrows $250,000 dollars at 5.5% interest pays 261,009 in interest. If you barrow only the $212,000 at 7% interest you end up paying the bank $295,758 in interest and you barrowed $38,000 dollars less money.
SO lets recap! You barrow less money and pay more interest by waiting to purchase and paying a higher interest rate. Is it really worth it to wait even if you think the market may continue to slowly fall before bottaming out?
