Are you thinking of buying a home in Farragut or Knoxville soon? Don’t let your luck run out! With the 30 year fixed mortgage rates still below 4%, you might be on the fence about buying now or waiting, because you think you still have plenty of time to lock in a low interest rate. However, you might change your mind when you see what the experts predict will happen to rates over the next year.
Predictions for 2016 (2nd Quarter)
- Fannie Mae Predicts 4.2%
- Freddie Mac Predicts 4.7%
- Mortgage Bankers Association Predicts 4.9%
- National Association of REALTORS® Predicts 5.3%
Let’s take a look at what even a small, .5% increase in the rate could do to the net worth of your family.
Today, on a $250,000 home, with an interest rate of 3.86%, your monthly payment (principal and interest only) would be $1,173.
The Home Price Expectation Survey projects home prices will rise approximately 4.4% in the next year. So in a year, the home above would cost $11,000 more and now be $261,000. If we add on top of that the mortgage rate increase projection of Freddie Mac (about an average of all the projections) at 4.7%, the monthly mortgage payment on the same home rises to $1,354.
That is an increase of $181 per month. And if you think that’s a big chunk of change, let’s multiply it over the course of a 30 year mortgage. Ready? You pay $65,160 more, just because you waited a year to buy.
What does this mean for you?
Well, it’s pretty obvious what it means for you as a buyer. Waiting is going to cost you quite a bit of money. It’s going to shrink your buying power and affordability. That means you will be able to afford more house now, than you will in a year from now (if your income level stays the same).
What does it mean for sellers? Well, what do sellers become after they sell? Buyers! So the same holds true for you. If you are waiting to sell your home because you think it will be worth more in a year, guess what, so will the house you will be eventually buying. Then add the higher interest rate on top of that.
So what this means for you is that there is no better time to buy and sell than right now. If you are interested in talking more about any of the information above or want to discuss buying a home, or selling a home in Farragut or Knoxville, as always, don’t hesitate to contact me, Troy Stavros with Gables & Gates, REALTORS. We’ll find a time that is convenient for you to sit down and discuss your plans and goals and how to best get them accomplished. I look forward to talking with you!