August 29th, 2013 11:20 AM by BILL WILBANKS
Let me start by saying up front that the improving real estate values today is definitely good news for the state. But, do you have any idea of the impact of rising values and rates? I got thinking about making a few related comparison's this morning and thought you might find the results of interest. I could have selected any number of loan-to-values (LTV) for the example and decided upon the generally used 80% LTV used in so many national advertisements today.
I got to wondering what things looked like in August 2012 and what impact the changes in values and interest rates in the last year mean to you today. So I used a typical example of a purchase based on 30 day lock quote on a $178,500 home purchase financed at 80% financing and the 3.5% conventional fixed rate that was available last August to determine the basis for a 12 month comparison.
Two basic assumptions:
1. That based on an approximate 12% appreciation in the last 12 months, this same property would be worth approximately $200,000 one year later.
2. That the current national average rate today is at 4.50% compared to the 3.50% last August.
So, a year ago: $178,500 x 80% LTV= $142,800 mortgage amount at 3.50% rate= $641.24 PI.
Then, today: $200,000 x 80% LTV= $160,000 mortgage amount at 4.50% rate= $810.70 PI
That means that same purchase today would carry a principal/interest payment increase of $169.46.
Now: $169.46/641.24= 26.43% payment increase one year later. In this example it also means that the downpayment has increased by $4,300 compared to one year ago. Of course higher LTV's would reduce that number.
On a comparative basis in most markets buying versus renting obviously appears to be the better option today even when the tax and insurance portion of your payment is factored in the mix, any tax advantages aside, but the purpose of this comparative analysis is to show that fence sitting on the buying decision has had a definite cost.
Call me today to find out what I can do for you. Rates can go much higher in the near future. Don't be a "Hind Sighter" and let more options pass you by today.