Price Reduction vs. Mortgage Rate

Posted by Amy Caniglia on May 31, 2011 in Market News | 0 comments

I got an email over the weekend from Jennifer Cleary, local mortgage broker with Colorado State Bank and Trust in Frisco, Colorado.  I thought it was an excellent example of how a home buyer that waits in the hopes that prices will go down farther can actually end up paying more for a house if interest rates rise even slightly.

For example, let’s say a Buyer is looking at a $300,000 home.  Instead of making an offer on the home that she wants, she waits for the price to be dropped by $10,000.  If, during that time period, the interest rates rose 0.75% to 6%, and if she were financing 90% of the purchase price, the amount of total payments over a 30 year mortgage would be over $35,000 more than it would have been had she purchased the home at $300,000 and locking in a 5.25% interest rate.   In other words, she would have “saved” $10,o00 only to end up paying $35,000 more! 

This is only a theoretical example, of course. However, in my opinion most home prices in our area are already very affordable and interst rates are still low … for now.  Waiting for a home price to be reduced may end up costing you much more than you expect if rates increase even a little. 

There are lots of great properties to look at and I believe it is a GREAT time to be a Buyer!  I suggest that you take a look, and make an offer!

We’d love to do a quick property search for you based on your criteria, and send you the results by email so that you can review them at your leisure.  It couldn’t be easier! 

Jennifer Cleary, Mortgage Banker at Colorado State Bank and Trust, can be reached at 970-668-2200 or  jcleary@csbt.com.