St. Louis Real Estate Blog

Buy a Home Now or Pay More Later?

October 19th, 2013 11:41 AM by Melanie Mitchell - Team Lead/Listing Specialist

Buy a Home Now or Pay More Later?

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With mortgage rates creeping up toward 5% as 2013 draws to a close, potential home buyers have some decisions to make — and soon.

A laundry list of economic issues, including inflation, consumer credit, and rising home prices has the U.S. housing market on the way to making a clean break from the days of the 3.50%, 30-year fixed-rate mortgage for the foreseeable future.

The danger for potential homebuyers isn’t that mortgage rates are nearing 5.00%; the real threat is that rates could go higher, to 5.50% or even 6.00% in 2014.

Think of it this way:

Buyer A snares a $300,000 fixed-rate, 30-year mortgage at a 5.00% interest rate, with the following payments:

• Monthly payment = $1,610.46

• Total payment = $579,569.69

• Total interest = $279,769.69

Buyer B grabs a $300,000 fixed-rate, 30-year mortgage, at a 6.00% interest rate, with the following payments:

• Monthly payment = $1,798.65

• Total payment = $647,515.44

• Total interest = $347,515.44

Buyer B will pay about $67,746 more for having a 6% mortgage rate, compared to a 5% rate, over the life of the loan.

Rates currently stand at 4.20%, according to Freddie Mac’s weekly mortgage rate survey.

While rates have been in decline the last few weeks, the big picture shows a general rise in rates to between 4.00% and 4.50% before the end of 2013. Which raises this question for potential homebuyers: Should you jump off the fence now, with rates still fairly reasonable, or do you wait and risk having to deal with mortgage rates as high as 5.00% or 6.00% in 6-to-12 months?

Call the MelanieCooperTeam today at 636-777-2872 for your FREE Buyer Consultation.

Posted in:General
Posted by Melanie Mitchell - Team Lead/Listing Specialist on October 19th, 2013 11:41 AM

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