August, 2012. You found your perfect home. It’s got everything you want, you’re pre-approved for the price, and you love it.
But you’re scared. You’ve heard that interest rates and home prices are at an all-time low, and you think they might still go lower. So you pass on the dream home.
Fast forward to August 2013. Another perfect home. Everything you want, pre-approved for the price, you love it.
How much more are you going to pay today for the home you could have bought last year? Ignoring the fact that home prices have gone up over the past year, we still have to figure out how the change in mortgage rates have affected your buying power.
In August of 2012, a 30 year fixed rate mortgage cost 2.74%. For a $300,000 loan, that’s a principal and interest payment of $1223.14 and a total payment over the life of the loan of $440,330.40.
Now it’s August 2013, a 30 year fixed rate mortgage costs 4.58%. A $300,000 loan results in a principal and interest payment of $1534.35 and a total payment of $552,366.00 over the life of the loan.
No one knows what the mortgage rates will be. But imagine what you would have done with the extra $110,000 you would have saved if you had bought the home last year.