Waiting to Buy a Home When Interest Rates are Rising Can Cost You

A recent New York Times article explained why mortgage interest rates are headed up. For specifics, check out:

http://www.nytimes.com/2010/04/11/business/economy/11rates.html?scp=1&sq=interest%20rates%20have%20no%20&st=cse

Since interest rates are near an all-time low and beginning to inch upwards, waiting to buy a home could cost you more than you might think.

FACT: Each .4% increase in mortgage interest results in roughly $25,000 less in purchasing power.
Look at the differences among purchase price versus interest rates:

If you choose a 30 year mortgage and put down 20%, the 80% loan, principal and interest payments are as follows:
$600,000 sales price, at 7.0% interest, payment is $3193.45
$625,000 sales price, at 6.6% interest, payment is $3193.29
$650,000 sales price, at 6.2% interest, payment is $3184.84
$675,000 sales price, at 5.8% interest, payment is $3168.47
$700,000 sales price, at 5.4% interest, payment is $3144.57
$725,000 sales price, at 5.0% interest, payment is $3113.57

Payments are similar. However, the home you can afford to buy at 7 % is approximately $125,000 less than the home you can afford to buy at 5 %. If you wait to purchase a home, higher interest rates may mean you will be able to buy less home in the future than you can afford right now. A wise strategy: talk to your lender and Realtor. Weigh all the pros and cons of real estate ownership; then make a well-informed decision.