Thinking Of Buying Or Selling? Here Is Why You Should Do It Sooner Than Later
Still thinking about buying or selling a home? Are you on the fence and not sure when to pull the trigger? If you are like me and most other human beings on this planet, you want to save as much money as possible.
As you have probably heard, interest rates are on the rise and while this would seem to only affect the people buying homes, it will affect sellers also as the pool of available candidates will shrink due to the rising rates. Even a tenth of a point can make a big difference in overall money paid on a typical 15 or 30 year loan.
Why now?
Since the election, mortgage rates have climbed roughly half a percentage point to a 16-month high, adding hundreds, sometimes thousands, of dollars to a home buyer’s yearly payments. (The annual cost of a $400,000 mortgage, for example, rose almost $700.) The speed and size of the increase took many lenders and borrowers by surprise. The increase is expected to reverberate across the housing industry, particularly if rates continue to rise next year.
Wall Street is also expecting that the Federal Reserve Bank will increase its benchmark interest rate when it meets next month. That rate — the cost that banks and depository institutions charge one another for overnight loans — has only an indirect impact on mortgage rates. Last December, for instance, after the Feds raised rates by a quarter of a percentage point, mortgage rates went down. But to the extent it reflects the Fed’s confidence in an improving economic outlook, it could signal higher borrowing costs in the months ahead. Still, for buyers who had been counting on paying less than 3.5 percent, the post-election bump represents an unwelcome added cost.
With that being said, now may be the best time to consider buying a home. Especially the people who may be renting. While there are certainly pros and cons to buying vs. renting, buying a home will give you the greatest bang for your buck. Given the hefty upfront costs associated with purchasing a home, most young people begin their independent lives renting an apartment. As they build careers, save money, and start families, many choose to buy a home and unlike renters, homeowners build equity over time and benefit from tax savings.
On most mortgages, a portion of each monthly payment goes toward the loan’s interest. The remainder pays down its principal (your lender’s amortization schedule shows the exact proportions, which change over time, for each month’s payment). Every dollar you put toward your loan’s principal represents a dollar of equity – actual ownership of the property. Even if you don't have money saved, a family or an established career, there are many ways to still buy a home.
