What’s The Difference Between Rate Reductions Vs. Price Reductions?

I recently received a short excerpt from Brad Roche a business friend and client of mine, and I thought it was worth sharing. ~ Sara

Rate Vs. Price Reductions

Everyone wants to get the best deal when buying a home. However, for potential buyers who are waiting to see if home prices come down a little more, the wait could cost them.

Let’s look at an example to see why. br

Say a homebuyer wants to buy a home that costs $300,000, but the buyer wants a better deal on the home. So, she delays a transaction until the home is reduced by $10,000. She also plans to finance 90% of the purchase price. What would happen if rates increased during her waiting period?

As she waited for the price to reduce, rates rose to .75% to 6.00%. She would end up having total payments over $35,000 more than paying the $300,000 purchase price on a 30-year term with a locked 5.25% interest rate. In other words, the buyer would save $10,000 only to end up paying $35,000 more.

Now these prices and rates are just for the sake of example. The point is that sometimes waiting for a home price to reduce may end up costing homebuyers much more than they expect if rates rise.

 

Find more information about Brad below.Brad_Roche_Pic

 

BRAD ROCHE
The Mortgage Planner
McLean Mortgage Corporation
Phone: 704-728-0191
Fax: 855-484-3752
License: NMLS # 135191
[email protected]
www.TheMortgagePlanner.net

 

 

Brad Roche and McLean Mortgage Corporation are not affiliated wtih FSC Securities Corporation.

About Sara Seasholtz

Sara Seasholtz, CFP®, was voted one of "50 Most Influential Women in Charlotte" by The Mecklenburg Times in 2011, and she's been a trusted financial advisor to her clients for over 30 years. Have a financial question?ASK SARA!

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