Cost vs. Price Explained
We need to talk more often about the difference between COST and PRICE. As a seller, you will be most concerned about ‘short term price’ – where home values are headed over the next six months. As a buyer, you must be concerned not about price but instead about the ‘long term cost’ of the home. Let me explain.Yesterday, it was reported that the Mortgage Bankers Associati
on (MBA) is projecting that mortgage interest rates will inch up over the next twelve months. Many experts are calling for home prices to also increase over the next year.
What Does This Mean to a Buyer?
Not only will the asking price most likely increase over the next year but so will interest rates. Back in 2006 when interest rates were at 6.5% the monthly principle payment on a home with a $400,000 mortgage was $2,528. Now with interest rates at 3.5% that same mortgage amount would end up costing you $1,796.
What Does This Mean to a Buyer?
Not only will the asking price most likely increase over the next year but so will interest rates. Back in 2006 when interest rates were at 6.5% the monthly principle payment on a home with a $400,000 mortgage was $2,528. Now with interest rates at 3.5% that same mortgage amount would end up costing you $1,796.
So the 2006 buyer with the SAME monthly payment of $2,528 can now afford a $562,972 mortgage with the current 3.5% interest rate. That is a lot more house!
Mortgage rates are varying regularly as compare to other interest rates. Pay attention to trends and keep in mind those present mortgage rates changes frequently. Instead of trying to pinpoint a day when the mortgage rate is at its lowest, ensure how the rates vary from one day to the next.
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