Sometimes the perfect deal just isn’t out there, or perhaps you're not completely convinced or motivated and feel that waiting may be a better idea. Maybe you want to see if interest rates go down a little more, which is always possible.
There are some significant financial factors based on timing that are working against you as you wait.
1. Inflation. If you’re not a homeowner, you’re not benefiting by the increase in value caused by inflation. If you wait 6 months to buy a $200,000 house and inflation raises that price by only 5% annually, you’ve missed out on $5000 “FREE” dollars. Instead of you getting it down the road, you’re giving it to the current owner now. Prices have gone up significantly over the last several years. View the graph to see Chicago's price appreciation.
2. Interest deduction. Depending on your tax situation, you could be writing off the interest portion of your payment on your taxes. If your tax bracket is 30% and your payments are in the $1000 range the interest portion is the majority of that payment. At only $800 interest per month you could be saving $1200 or so on your taxes for that six months.
3. Mortgage Paydown. On the other side of the mortgage is the principal you’re paying as part of your payment every month. It may only be $75 at first, but multiply that times waiting 6 months and that’s another $450 lost.
4. Rates go up. If you wait six months and interest rates go up 1%, your payment will be another $100 a month more, for 30 years, which adds up.
It may not seem like much here or there to wait, but you will most likely miss out THOUSANDS of dollars by waiting.
Granted, there is no perfect house. Sometimes you just need to compromise to find the best house for you that fits in your budget.
We're here to provide you with expert guidance when buying a home in the Chicagoland area. Contact us for assistance.