Quote:
Originally Posted by GregWeld
Steven --
Here's the problem with that thinking.
Interest compounds at the payback total will be HUGE compared to the lower interest rate - not to mention the monthly payment will also be far higher.
The housing prices might not rise as much - as demand dampens - but they still tend to rise... so by waiting - you not only pay a higher first cost - your monthly outlay is higher and your total outlay is also.
EXAMPLE:
You buy a house at 300K with 50K down - and finance 250K at 8%
Monthly payment is - 2,146.91
Total payback is - 772,888.12
Same house same down payment but at 4%
Monthly payment is - 1,506.04
Total payback is - 542,173.77
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I totally get the compound interest part, but why would that house sell for the same price at 8% as 4%. Since payment affordability is based off a ratio of monthly income, the house should be cheaper.
I'm simply trying to justify to myself that I won't be screwed over when I go to buy a house in 5 or so years when these dream rates are gone.
