There are many people out there who debated purchasing a home over the course of the last year, but ultimately did not. Whatever their reasons were for delaying, let’s look at whether the decision to wait to buy made sense.
What happened in 2014?
The 30 year fixed rate on January 2, 2014 was 4.53% as reported by Freddie Mac. Looking at the chart below, your monthly mortgage payment with principal and interest for a $250,000 home would have been $1,271.17.
Even though interest rates have dropped below 4% and ended 2014 at 3.87%, home prices appreciated by 4.8 percent over the same time according to the Home Price Expectation Survey.
So that same home appreciated by $12,000 and now costs $262,000. The most recent report by Freddie Mac reports the average 30-year fixed rate is currently 3.73%.
Many may say, “See waiting a year made total sense, I’m saving $60 a month.” And they’d be right, over the course of the year they saved $729.36.
But what they haven’t realized, is that as the price of the home they purchased went up by $12,000, even if they just put a down payment of 5%, they had to come up with an additional $600 at the start of the process. So really they’ve only saved $129.36 in a year.
Is a savings of $11 a month really worth holding off on pursuing a home to call your own after you weigh all the benefits that come along with that?
- Building equity you can borrow against in the future
- Having a safe, comfortable environment that fits your family’s needs
- Having control over your space
- Tax benefits
- And so many more…
The experts are predicting that homes will appreciate by another 4% and interest rates will increase by a full percentage point by the end of 2015.
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