Whether you’re buying your first home or selling your current house, if your needs are changing and you think you need to move, the decision can be complicated due to personal and professional considerations.
However, there’s one category that provides a simple answer. When deciding to buy now or wait until next year, the financial aspect of the purchase is easy to evaluate.
- Do I think home values will be higher a year from now?
- Do I think mortgage rates will be higher a year from now?
From a purely financial standpoint, if the answer is ‘yes’ to either question, you should strongly consider buying now. If the answer to both questions is ‘yes,’ you should definitely buy now.
Nobody can guarantee what home values or mortgage rates will be by the end of this year. The experts, however, seem certain the answer to both questions above is a resounding ‘yes.’ Mortgage rates are expected to rise and home values are expected to app rather nicely.
What does that mean to you?
Let’s look at how waiting would impact your financial situation. Here are the assumptions made for this example:
- The experts are right – mortgage rates will be 3.18% at the end of the year
- The experts are right – home values will appreciate by 5.9%
- You want to buy a home valued at $350,000 today
- You decide on a 10% down payment
- You pay an extra $20,650 for the house
- You need an additional $2,065 for a down payment
- You pay an extra $116/month in your mortgage payment ($1,392 additional per year)
- You don’t gain the $20,650 increase in wealth through equity build-up
We asked David Duplessis of LeaderOne to give us his thoughts and opinions and here’s what he had to say. “I completely agree with the idea of buying now. I purchased a home in October 2020 with Jenn Madden’s help so I’m speaking from experience. Today’s low interest rates more than make up for a leveling off of the housing market, should that even happen. At least you can be assured of a low rate if you buy now. Also, when you consider a low or NO down payment program, your return on your upfront investment for the down payment and closing costs is often 100% in one year.
There are many things to consider when buying a home. However, from a purely financial aspect, if you find a home that meets your needs, buying now makes much more sense than buying next year.