I'm always interested when I see agents posting on social media or their websites about the “true cost of waiting” to buy a home. It's a little-used approach to explaining how time and increasing mortgage rates combine in a one-two punch to hit a purchaser's buying power.
Here’s a typical scenario that might play out in Central Pennsylvania. The home you’re interested in can be had for $200,000, and the mortgage rate is 4.25 percent for a 30-year fixed mortgage. That means your locked-in monthly cost will be $983.88 for the loan itself (outside of taxes and insurance, etc.).
Now, if you were to wait another year, what would your situation look like? Should the market price advance only 5 percent – to $210,000 – and the rate climb 1 percent, to 5.25 percent (still a great rate, BTW) – your 30-year payment will climb to $1,159.63. That’s $175.75 more per month for the rest of 30 years.
It’s like throwing six bucks out the window each and every day… so much for the latte.
I talk to many young people who are regularly employed and feel pretty comfortable with renting or staying at home. There are some decent arguments in favor of those renting – and woe to those who linger in their parent’s house too long – but the time value of mortgage dollars is one of the strongest arguments in favor of buying, especially while the real estate market is in transition as it is in 2014.