Mar
25

The Actual Cost of Waiting for San Diego Home Prices to Drop More

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Yesterday on the radio show (thank you again Jeff for having me on) I mentioned how home buyers who are waiting to see if San Diego Real Estate prices will drop more  might be missing the boat on the total cost of waiting.  Here is a quick example on how interest rate can affect the total cost of the home more than home value in this market.

Let’s compare a home with a 5% 30 year fixed mortgage and the same property with a 6% mortgage with a 5% reduction in price.   For the example below I used a home priced at $400,000 at 5% interest and the same home at 5% less for the purchase price with the higher rate ( where analysts say rates will be by the end of the year) but the example can be modified for any purchase price and rate range.  As you can see the higher purchase price and loan amount has a LOWER payment by $105 per month. I understand that $105 dollars is not a huge amount of money but it might as well be a million dollars if it puts a buyer over the Debt-To-Income level that is needed to qualify for the loan. 

 San Diego Real Estate Prices 1

 In this image you can see that over the life of the loan that $105 per month really adds up to $53,730 in net savings.  Hopefully at this point you can see the value of the savings and please note that this is at 0% interest so if the savings was properly invested or even just put in a savings account it would be much more (due to compound interest).

 San Diego Real Estate Prices 2

 

Here is where the real magic happens!! If that extra $105 dollars a month was put toward the mortgage payment you can see that the mortgage would be paid off in 26.42 years instead of 30. this would result in a total savings over the house at a “LOWER” price of $95,766.

 

 San Diego Real Estate Prices 3

For more information on how to reduce the total cost of a new loan or your existing loan (without a refinance) give me a call at the office @619-285-2921.

Comments

  1. Hiya from France! I have found your html page on alltheweb. Great content! Melissa M. Clayton x

  2. tbuss says:

    thanks for showing me example joe i heard you on the radio and it really helps to see it black and white.

  3. @tbuss. I’m glad that you found the information helpfull. Thanks for stopping by.

  4. [...] original here: The Actual Cost of Waiting for San Diego Home Prices to Drop More … By admin | category: diego refinance san | tags: diego, estate, fha, homes, [...]

  5. @ Kitchner.. Thanks for stopping by all the way from France. Hope to see you again soon!

  6. I sure hope this new loan mod initiative will help get the real estate market moving up again.

  7. This is a very good point that many people overlook. People paying cash for a property can afford to wait. While those who will be securing financing will need to consider moving forward whiles rates are still low. Great post.
    .-= Golf Communities´s last blog ..Harbour Crest in Tennessee =-.

  8. Barry Brickel says:

    To sum it up Affordability is combination of home prices and mortgage interest rates. Both factors determine how much of a home you can get for your money. At the moment affordability is the highest since 2003. It is more likely Interest rates will go up and have the bigger impact. Another factor overlooked is the amount of equity buildup due to paying down principle faster at the lower rate.

  9. Barry,

    Thanks for stopping by. You are 100% correct about using extra principle payments to bring down the overall “cost” of a home. Unfortunately many of the clients that I speak to are only looking for a lower monthly payment and the lower cost overall is taking a back seat.

  10. Iver Hines says:

    You made some Good points there. I did a search on the topic and found most people will agree.

  11. Sabrina says:

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  12. Laura says:

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