COST OF NOT BUYING HOME NOW

1. Rent Lost

Rent = $1,200/MO The average person takes 30 days to buy.If you wait 6 months, you will pay you landlord ……………….. $6,000

2. Rate Change

If today’s rate is 5.5% on a 30 Year fixed rate mortgage, assuming a $200,000 sales price with 5% down:Your payment will be….$1,073 per month…

The following shows what happens to your payment if your rate goes up by the time you buy (in ½% increments)

Rate.......Pmt.....Loss/mo.....Cost/1YR.....Cost 7/YRs.....Cost 30/YRs

6.0%.....$1,133.....$60.........$720..........$5,040..........$21,600

6.5%.....$1,194.....$121........$1,452........$10,164.........$43,560

7.0%.....$1,256.....$183........$2,196........$15,372.........$65,880

This number you must look at from the long term picture. If you wait 6 months to buy a home, it is possible (or even likely) that the rates will be up .5%. The cost/loss to you IS NOT $60 per month. The cost is $60 per month times however many months you own the home. The average American owns a home 7 years, so that loss equals $5,040. If you keep this home as a rental property (a great idea especially for your first home and when rates are this low) then the loss is times 30 years, or $21,600. Of course if you look at it like a good financial planner would, your loss is not simply the $21,000 but it’s that amount times the opportunity cost of lost interest had you invested that money yielding 5%-10% appreciation compounded annually. This of course multiplies the loss to 2 to 3 times the actual cash loss!!!!

And if you are waiting until "next year" to buy that rental property…"Hello,…McFly!?!"

3. Appreciation Lost (Assuming a $200,000 sales price)

Appreciation.....Per Month.....6 Months.....1 year

3%................$500........$3,000.......$6,000

5%*...............$833........$5,000.......$10,000

6%................$2,000......$6,000.......$12,000

8%................$1,333......$16,000......$32,000

10%...............$1,666......$20,000......$40,000

*Metro Atlanta typically appreciates at an average rate of 4%-5% per year. Atlanta was predicted to appreciate 24% over the next 5 years (CNN.com "Top 10 Places to buy-NOW")

4. Tax deduction/interest write off

This is the trickiest of the calculations because everybody’s tax situation is different, and the tax code is a tad bit complicated. But as a general rule, you can write off 100% of the interest portion of your payment. And if you didn’t know, the interest portion is MOST of the payment (for the first few years anyway)

For example: using the examples above, with a $1,073 per month payment ($190k loan @ 5.5%), the interest portion of the first payment is around $850 per month. So that’s the write off that you will NOT be getting per month until you buy. Most people buying this price home are in the 28% tax bracket plus 6% state. That means the actual cash loss is the monthly payment times your tax bracket. Let’s say 33%. So in this example, you are losing $280 per month CASH in tax deduction that you are not receiving. That’s not even taking in to account that writing off $10,200 per year ($850 times 12 months) would probably take you in to a lower tax bracket; consequently, you would pay taxes at a lower rate…… (again, I am not an accountant nor do I ever want to be one; so, consult a CPA regarding your particular tax situation)

So,….Your "lack of deduction loss" is appx.…. $250- $300 per month

SUMMARY: IF YOU WAIT 6 MONTHS TO BUY, YOU ARE LOSING BETWEEN $8,000 AND $15,000 IN THAT TIME ALONE! IF YOU MISS TODAYS RATE, IT COULD COST ANOTHER $15,000 TO $100,000 MORE OVER THE LONG HAUL.

**This is not intended as an earnings claim on purchasing real estate property.