Don’t be put off by high house prices – you could end up paying more in interest if you wait for them to drop!
Over the last couple of years, the real estate market has really ramped up. In fact, between October 2020 and October 2021 CoreLogic’s Home Price Index reports the average price of an American home went up by 18%, the sharpest rise in over 45 years.
If you’re thinking about buying a new home right now, you might be thinking it’s best to wait for prices to fall before making your move. But unless you are paying cash for your home, real estate prices are not the only indicator of what you’ll be paying each month. Waiting for the market to drop could be a financial misstep and end up costing you more in interest.
The dream conditions for anyone trying to finance a house purchase would be low house prices combined with low interest rates: The outright cost of property is low and so are your monthly payments. But if you wait for this golden moment, you might never buy anything as this type of market is incredibly rare.
Interest rates and housing prices tend to see-saw so while one is high the other is low. Right now, house prices are relatively high. However, interest rates are low which is great news for anyone borrowing money.
In these conditions many investors find they save money vs waiting for the housing market to drop and having to pay a higher interest rate. Our mortgage calculator can show you the impact of different rates on your monthly payment.
Below is a general example of monthly payment based on 10% down and excluding taxes and insurance. For the best monthly payment estimate consult with your mortgage lender.
If you buy a house while interest rates are at 3% for $300,000 with a 10% down payment your monthly repayments will be $1,388.00 But if you wait for the market to drop, let’s say the same house costs $279,000 – sounds like good value, right? You might be surprised. Interest rates will rise to compensate for the drop in the housing market, and you could end up paying more each month for a ‘cheaper’ house. Based on interest rates of 4.25% you could be paying an extra $79 each month, and that certainly adds up over the course of a 30 year mortgage.
If you’re planning on staying in your newly purchased home for 5 years or more, you would be wise to pay close attention to interest rates, rather than becoming fixated only on the cost of homes. With this strategy you will keep your repayments low and ride out any short-term fluctuations in the value of your house.
About Michigan Lender, Julie Krumholz
Julie Krumholz has been helping Michigan homebuyers for over 30 years and has several loan programs available for various incomes and financial situations. She brings a wealth of experience to her clients and nothing makes her happier than seeing the face of a happy and excited customer at the closing table.
If you are looking for a mortgage lender in Michigan, call Julie from Superior National Bank today at: 586-382-5482 and let her help you navigate through the loan process and answer any questions you may have.