Are you considering the purchase of a condo or single-family home?

At the same time that home prices in Boston have stagnated or dropped slightly, mortgage loan rates have been going up. They are now near their year-high level.

What to do?

From the Times:

… Celia Chen, director of housing economics at Economy.com, did some calculations on the impact of rising interest rates on a potential home buyer’s budget.

Take, for instance, a couple who buy a $500,000 home and make a down payment of 20 percent, or $100,000. With a 6.43 percent interest rate on a 30-year fixed loan, their monthly payment would be $2,510. Over the 30-year life of the mortgage, they would pay a total of about $1 million for the home, including the down payment.

But what if that couple had waited and the home price dropped 9 percent to $455,000 but mortgage rates rose to 7.01 percent? Now, the 20 percent down payment would be $91,000, and the monthly payments $2,424. The buyers would end up paying a total of about $964,000 for the house, or nearly 4 percent less. If the buyers were able to refinance to a lower rate a few years later, the total cost could be even lower …

Interesting analysis.

Of course, the chances of you owning your next home for 30 years is slim. So, you’ll need to do more research on the cost-benefit of buying now versus later.

If you’re refinancing, the article makes a good case for doing it now, versus later, due to the potential for continued increases in rates. Especially worth doing if you fear a continued loss in your home’s value.

Source: Mortgage Rates Creep Back Up – By Tara Siegel Bernard, The New York Times

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