Thinking About Buying a Home?
Have you been considering a home purchase? For most people, buying a home is the biggest investment you will make, particularly in Southern California. The question of when to buy is something that needs careful consideration. It is important to get wise counsel on how much of your discretionary income should be spent on a mortgage. If you have decided the time is right to buy a home, then it may make sense to buy sooner rather than later.
Why Now?
It’s all a numbers game. Right now interest rates are hovering around 4.3%. According to Freddie Mac, projections are for mortgage rates to climb to 5.1% next year. It’s called The Cost of Waiting to Buy. How much additional money would it take if interest rates increased as they are predicted to do? So we got our calculators and did some math that is pretty eye-opening.
Crunching the Numbers
For ease of calculating, we will look at the difference between 4% and 5% interest rates on a $500,000 mortgage and a $750,000 mortgage, to be paid out over 30 years. Look at these numbers and consider the savings to buying now.
$500,000 – 30 year loan
4% Interest Rate
Monthly payment: $2,387
Annual: $28,644
30 year cost with interest: $859,348
5% Interest Rate
Monthly payment: $2,684
Annual: $32,209 3
30 year cost with interest: $966,280
Difference:
$297/month
$3,564/yr
30 year: $106,932
Now let’s look at a $750,000 loan over 30 years.
$750,000 – 30 year loan
4% Interest Rate
Monthly payment: $3,581
Annual: $42,967
30 year cost with interest: $1,289,020
5% Interest Rate
Monthly payment: $4,026
Annual: $48,314
30 year cost with interest: $1,449,417
Difference:
$446/month
$5,346/yr
30 year: $160,397
So you would be saving between $106K – $160K depending on the price of your home.
What If?
What if you took the monthly savings by taking out a loan at a lower interest rate? If you reinvested the monthly savings, at a conservative 8% rate of return over 30 years, you would have an incredible nest egg!
$500,000: $297/mo @8% = $442,636
$750,000: $446/mo @8% = $647,700
At LoanLeaders of America, we adhere to our Business Philosophy and Strategy to provide high quality mortgage loans, at the most affordable rates, using a wide variety of Mortgage Lenders to find the one that is right for you. We also have a vast selection of Mortgage Loan Programs.
Since we were established in 1997, LoanLeaders of America has managed to be ranked in the top 25 Nationwide Wholesale Lenders by the National Association of Mortgage Bankers year after year. Since our beginnings, LoanLeaders of America has remained one of the nation’s top originators of residential mortgages. As a direct lender, LoanLeaders of America is known for our ability to close a loan in as little as 2 weeks. LoanLeaders of America knows that great rates are not enough, so we work diligently to maintain an exceptionally high level of service. Contact us to see how we can assist you!
Shutterstock: Andy Dean Photography