We work with a lot of first-time home buyers here on The Michael Kaslow Team. As we are talking to individuals, on a daily basis we hear that people are not ready to buy because they need to save up for a down payment. Saving up money for buying a home can be a very daunting task. But we wanted to give you a few tools to show you that in some cases, you can actually SAVE money by not waiting 6 months to a year for your first purchase. Below you’ll find a real-world condo in Minneapolis that many first-time home buyers are on the hunt for (in our experience). We have then broken down an estimated payment, if you were to purchase this home with the current interest rates. Finally, we’ve calculated what that same payment would look like a year from now if you decided to wait.
If you were to purchase the above condo at $200,000 with today’s average interest rate of 4.75%, your monthly payment would be around $1661.
If you were to wait a year or two, the interest rates are scheduled to not only hit 6% by 2020, but continue to rise beyond that. Below is an estimated payment breakdown if you were to wait a year:
As you can see, waiting to buy would cause you to spend over $3,000 more in mortgage payments within the first year alone. And because the interest rate stays with the loan for its life, you’ll actually be paying much more in the long run. We like to share this with our buyers because, while saving up for a down payment can be beneficial, you could also be costing yourself thousands of dollars over many years (i.e. the length of your loan). The long and short of this situation is: what you’re able to afford today is not what you’re able to afford in a year. If you find yourself in this position, whether you are on the threshold of being ready to buy, or you need to save more for a down payment, please reach out to us today! We have access to many creative solutions and programs that empower first-time home buyers, and make their purchases more affordable.
** Please note that interest rates and monthly payments are directly correlated to a person’s individual credit score and finances. Above payments have been calculated using a great credit score of 740 or above.