Some buyers are concerned about buying a home that will drop in value in the coming months. But buying a home is a long-term investment, and there’s more to consider than just the purchase price. From 1980 to today the 30-year fixed rate mortgage has ranged from more than 18 percent to less than 5%.
If you’re waiting for home prices to come down another $10,000, you may pay more in the long run if mortgage rates rise in the meantime. For example, look at the below chart. You’ll see that even with a higher loan amount at a 5% interest rate, the monthly payment is $50/month lower verses a lower loan amount at a 6% interest rate. Also, the amount of interest paid during the total life of the loan is almost $30,000!! So, waiting for prices to come down is very risky.
| Loan | Rate | Payment | Total Int |
| $270,000 | 5.00% | $1,449 | $251,791 |
| | | | |
| Loan | Rate | Payment | Total Int |
| $250,000 | 6.00% | $1,499 | $289,595 |
| | | | |
| | | | |
When you are looking for a bargain, don’t lose sight of the big picture. If you try to time the market to save a few thousand on the price of a home, you could end up with a higher monthly payment and total overall cost of home ownership.
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