By Tia McCormick
Making the decision to buy a home is undoubtedly one of the biggest decisions you’ll make in your life. It’s no surprise that so many people, especially first-time homebuyers, delay that decision.
However, if you are one of those people waiting for the perfect time to buy, we have four reasons why waiting can actually cost you.
1. Rates Are on the Rise
In the last few months, mortgage rates have started to hover in the high four to five percent range, a level we haven’t seen since 2009 (the last time the average rate was five percent. As a result, many prospective buyers are waiting for rates to come back down.
They will likely be waiting for a long time.
The problem is that many people have a skewed perception of what constitutes a high or low-interest rate because the Fed has kept rates at historic lows for a decade.
Ten years ago, prior to the 2008/2009 housing market crash, a good interest rate was between six and seven percent. Twenty years ago, a good interest rate about eight percent. In 1982, a good interest rate was 17 percent! So, in relation to historical rate trends, we are still in a very good place for buyers.
Now that the economy is doing well, and the housing market has fully recovered, mortgage rates are making their way back up and they are expected to continue that trajectory.
2. Housing Prices are Rising
New homebuyers, especially millennials, are pouring into a housing market that is currently experiencing a significant lack of inventory across the country. Because of this increasing demand for housing that is hard to find, prices rose by over six percent last year.
As long as we are experiencing both high demand and low inventory, there is little reason to expect that this increase will level off any time soon. It is likely that if you wait another year, you could be buying a house for an additional six percent over what it is worth today.
3. Buying is Investing in Yourself
Renting may have some convenient aspects to it, but when you pay rent, you’re essentially buying someone else’s house or apartment building for them plus a little extra for their profit. You never receive any further value for the money you’ve spent.
On the other hand, the money you put into a mortgage becomes your equity in an appreciating asset. There are many ways you can use that equity, such as paying off other debt, paying for school, investing it, using it later to buy another home, or simply watching it grow as you make payments and as the value of your home rises.
So, why not use the money you work hard to earn to buy your own home and invest in yourself and your future?
4. Tax Benefits
An often-overlooked aspect of buying is the tax benefits it provides. You can deduct the interest on loans up to $750,000, as well as your local property taxes, from your federal taxes every year.
The majority of the first couple of years of your mortgage payment goes to paying interest. So, after you buy a home not only will you be building equity, but your tax bill should also be significantly lowered.
How to Stop Waiting
To avoid paying more for a home down the road and to take advantage of the equity and tax benefits of buying early, it’s best to buy as soon as is practical. Speaking with a mortgage loan officer is a great way to expertly navigate the obstacles you face and find the best solution for your situation.
If you are considering buying a home, but have concerns that are causing you to wait, contact me today and we can discuss the best way you can avoid the costs of waiting.