Loan Analysis: Buy Now with Rates or Wait.

Loan analysis. People are asking you, should I buy now?

Interest rates are scary. They’re going up. Should I wait? Should I? What’s going on here? So the classic case of interest rates are high. I shouldn’t buy now. I need to wait. That’s a concept that people make based on interest rates.

But there’s other variables. If that was the only variable, then that would make sense to wait based on that. But let’s go ahead and do some calculations.

So we’re going to split the screen and we’re going to show off a mortgage calculator, and we’re going to make some decisions based on that because your clients are going to be asking you these things, right? And I’m going to go ahead and take control and see if we can go over.

Here and see what we got so the first thing thatmI’m going to do is look at maybe what a standard home in our area used to be.

So I’ll put in 350,000 for the average home and interest rates were lower. So I’m going to put in 3% here.

And I’ll show you what your payment would be. So we have roughly a $4,500 payment on a property that ism350,000. So that’s maybe where we were before.  

Now, as we fast forward here, we have a different set of circumstances. So what’s happening is interest rates are going up.

So let’s put in a higher number here and see what happens. So now on its own, we had an increase in the payment because we simply changed the interest rate. Now all we did is we kept the loan amount the same changing interest rate. Now our payments higher.

And that’s what most people look at is they’re like, well, it’s going to be much more expensive, but there’s other variables. And the other variable.

Is the fact that what we also have going on is that the value of the home became more expensive. So let’s take that same house and put some numbers in here and say that it goes to 500,000. Now the payment goes up even more because it became more expensive.

And then this is what people talk about with home affordability.

That it’s a difficult thing. And who can afford this now that the payment went from for that same house and went way up to here?

So I do understand that and then people are worried that in the future we’re going to have a higher number nonetheless. So now we’re going to have like a7% number.

And this is going to go up. But if you simply wait for the interest rate to go back down or hope and wait, then what you miss is something like this.

So what we’re going to have now is the value of the home is continuing to go up and appreciate. So what you’re going to have is if you do wait, the home is now going to cost you probably 700,000 later. And then you can wait for.

The interest rate not to be a number like that and you can wait for it.

To go back down to something like 3% and you can wait on this higher number now in your monthly payment will be less because interest rates are less. But what you’ll have is a higher loan amount in your balance will be more in. What you simply missed out on is all of the appreciation with the property going up in value. So what are you going to do? You’re going to be sitting on the sideline and miss all of this price.

Appreciation because you want a lower monthly payment. What you need to be is you need to be in the market as it’s going up, right?

So you need to be buying more and more and more. And by doing that, you’re actively participating in the price appreciation and the balance going up and then that money goes into your pocket. It’s really hard to save and accumulate wealth, but real estate is one of the best wealth builders there happens to be.

So it almost is irrelevant of what the interest rate.

Is. It goes back to more of what did you actually pay for the property and what did you sell it for, right? So everyone right now was like, I really don’t care what the interest rate was before because now my home is worth more. So just think about that one.

When somebody asks about interest rates, talk more about pricing and price appreciation and how all of that is actually just putting money in their pocket.

So just buy more real estate, ladies and gentlemen. That’s good for today.

Episode Links

mortgage calculator, Mike Acquisto , TNT 

Episode Recorded Live on YouTube 05.05.22

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