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First, you must consider your financial situation. If you can afford it, and rents in the area are either the almost the same, or higher than paying a mortgage payment, it would make sense. You would be living the american dream, building equity, while obtaining more tax break at the end of each year -Instead of paying someone else's mortgage on their property.Why now instead of waiting 3-4 yrs? First, we have all time low interest rates mortgages loans available, property values in most areas have drop, so you're able to buy more home for the money, or spend less on a home than you would have in the past. Best of all, we know the Present, who really knows the future.
Did the interest rates work in relation to housing prices? NO, the interest rate is related with the economy situation, the home prices were related to the affordable housing costs.In one year from1999 to 2000 the interest rate increased 1%, the CA home prices increased 5%-10%.From 2006 to end of 2008 the interest rate decreased 1%, the home prices decreased 40% (easy to explain).From beginning of 2009 to mid 2010 the interest rate decreased 1%, the median home prices increased 15% in CA, flatted in US.After the government stops purchase Mortgage Back Security, many real estate analysts and the lenders, who predict the massive rise in the interest rate, it turns out that the interest rate keeps dropping.While the CA's economy was got the bad news in 2009, many real estate analysts predict the massive drop in home prices, in fact the CA's home price rose 15% from Jan. 2009, even before of the $8,000 tax credits and at the worst time of the foreclosure activities with 46% foreclosure sales in April 2009 in CA.Follow is the copy from the other post:
These are the assumptions, which nobody can see:* Home prices rise, flat, fall in the future.* Interest Rates rise, flat, fall in the future.* Economy rise, flat, fall in the future.
The reality:$100K home, 4.75% interest rate, 30 years term, assumes 100% Loan To Value.In the 12th month, the mortgage balance is $98,456. You have $1,542 equity.Since you had to pay for the 30 years mortgage anyway (buy now or buy later), you save 1 year rent total of $7,200 if you are buying now.Total of the saving is $1,543 equity + $7,200 rent = $8,743.In order to break-even of "buy now and buy later", the $100k home today needed to be $91K home in the 12th month, in other words the home price needed to drop 9% and the interest rate stays same at 4.75% in order to break-even from the today home price, if you are buying home in next year.
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