The True Cost of Waiting to Get a Mortgage
If you were looking at buying a home for $300,000 today, what would the cost of waiting a year be?
According to readily available data, the cost of waiting to purchase a home is more than you would think. Using a magical mortgage tool that we have access to, we analyzed the exact scenario laid out above. The analysis we ran at a $300,000 sales price home shows that it would cost $35,000 to wait on buying a home ($6,006 in Amortization Lost & $29,180 in Property Appreciation). That’s a lot of dough! If you waited 2 years to purchase that same home, it would be $55,000 ($12,210 in Amortization Lost & $42,074 in Property Appreciation)!
Cost of Renting Increases
Last year many Americans got a break in rental price increases due to the presence of Covid 19. Many of those property restrictions that were put into place are now ending or have ended. According to the article by apartmentlist.com, “The pandemic pricing we saw last year where rent decreased by around 20 percent is now over.” Especially in tourist states like Florida, rent prices are growing at an unprecedented rate. “Since the beginning of this year, the national median rent has increased by a staggering 16.4 percent. From this last month alone, the national index increased by 2.1 percent. Compared to the past few years the national index never went more than 0.9 % per month since 2017”(https://www.apartmentlist.com/research/national-rent-data). So instead of paying rent for a property you don't own, why not build some equity in a home that you do own? Stop paying other people's mortgages.
Increase in the Appreciation of Homes
When you continue to rent, you are not able to gain any appreciation on your home. Every single month, you are burning that rent check. Every year you own a home, the value of the home appreciates in value. Since we are still in such a seller’s market, homes have been appreciating rapidly. Generally, your house will appreciate from 3.5 % to 5% per year. But since interest rates were so low and the demand for homes were so high, houses last year were appreciating easily 8%-10% in our Trinity area. Using $300,000 as an example, that's $30,000 dollars worth of equity that you would not have if you were renting.
Potential Increase in Interest Rates
Economists are predicting that interest rates are going to 3.5% to 4% next year, due to the government tapering the purchasing of treasury bonds and mortgage back securities starting at the end of this year. The government was buying bonds in bulk to keep interest rates lower during the pandemic. Since interest rates directly correspond to the bond market, this was a major factor in keeping interest rates near or at historic lows since last year. So if you buy a home next year, there is no guarantee interest rates will be as competitive as they currently are.
For all of these factors, reaching out to see whether or not buying a home makes sense for you is an excellent idea. If you are interested in purchasing a home, please contact us at 727-376-6900 or go to www.chissellmg.com for more information.
Go to this article to find out more about rent appreciation: https://www.apartmentlist.com/research/national-rent-data
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