We recently had a borrower repeat a refrain we heard often in years past: “I think the market is over-priced right now b/c there is too little inventory; I am going to wait for prices to drop even if it means I have to take a higher rate; higher rates may actually push prices even lower.”
This was our quick and oft-repeated refrain: You are better off with today’s prices and exceptionally low rates.
Here are examples: A $750,000 purchase today with 20% down and 3.75% rate will result in PITI of about $3,600 (rounded).
If that same house drops to $700,000 (highly unlikely we think) and rates are up to 6%, PITI will jump to $4,160 (rounded; assumes 20% down again).
Even if a buyer saves $50,000 in price, he will still be over $500 per month worse off in payment if rates drift back to even a historically low “6% range.”
The loan amount associated with the $700,000 purchase will be $40,000 lower, but the 1.5% higher rate pushes the payment over $500 higher.
Low interest rates are truly a gift.
Founder/Broker | JVM Lending
(925) 855-4491 | DRE# 01524255, NMLS# 335646