Same Price, but Less Cost!

There is more and more research coming out showing that it makes great financial sense to purchase a home in today’s market. Whether it is looked at through “rent vs. buy ratios,” “income-to-price ratios” or “income-to-mortgage payment ratios,” purchasing a home right now is a bargain compared to past times. Let’s look at the cost of purchasing a home today in contrast to pre 2007 peak prices.

According to S&P Case Shiller price index reports, residential real estate values have returned to 2003 price levels. That, in itself, says something about home prices. But when you take into consideration today’s mortgage rates, the case for buying a home today becomes even more compelling.

In 2003, 30 year mortgage rates were around 5.88%. Today they are 4% average. So how does that impact the actual “cost” of a home? On a home purchased for $250,000, here is the difference in monthly costs:

For example, in 2003 with a loan amount of $250,000, interest rate of 5.88%, monthly payments Principle and Interest (P & I) would have been around $1,480.

Today, with a loan amount of $250,000, interest rate of 4%, monthly payments P & I would be $1,195.  That’s a difference of $285 less in monthly mortgage payment.

That means you save about $3,400 a year and $103,000 for the life of a 30 year loan! You essentially buy the home for the same PRICE but the COST is $100,000 less.

In the end

This is why so many are saying that this may be one of the greatest times in history to purchase a home.

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