Buy Now or Wait to Buy?

[Logan McKay Zylstra]

If you are waiting for a market correction, it will definitely cost you in the long run.

An example:

Buy a house now with 10% down at a $525,000 purchase price with an interest rate of 4.5%.

Payment: $3,162

Buy a house now with 10% at a $488,250 purchase price with an interest rate of 6%.

Payment: $3,390

The FED has told us that they will be increasing rates again at the beginning of May, with other hikes in interest rates to follow. There is a misconception between the purchase price and interest rates from the way that I see it. Interest rates affect mortgage payments much more than the loan amount does.

At a 5% interest rate, the difference in a $1,000 increase in a loan amount is only about $5 per month. On the flip side, while you are waiting for the market to correct and drop by $10,000, you are only saving yourself $50 in monthly payments. Meanwhile, interest rates will only continue to rise, counteracting any perceived benefit of waiting for prices to fall.