Mortgage Insurance slated for Tax Deduction

Home Buyer Looses $22,262

Waits 1 Year Before Buying

The cost of postponing your home purchase may be greater than you ever imagined. Here is an example of the impact of delaying your purchase 1 year.

Interest rates are now 1% higher than they were this time last year and expected to rise even more in the next 12 months. The cost of a 1% interest rate increase on a $150,000 loan over the next 7 years (average home ownership period) is $12,600. Remember the higher interest rate stays high through the life of the loan. So every year you own is costing you more than it would by buying during a time of lower interest rates.

Annual appreciation of home prices in the Central Ohio market area has been 4%. A $150,000 home will rise $6,000 in 1 year. New home construction is rising at 8-10% annually. The cost of a 1 year delay could easily exceed $10,000 on the purchase price.

By renting for 1 more year, the money that would go toward lowering the loan balance is lost. A homeowner would realize a loan balance reduction of $1,800 in 1 year on a 30 year $150,000 loan. Renters realize no such equity building.

Finally, the federal income tax savings lost over a 1 year period while renting would equal about $1,862. That is the tax savings from the added deduction of loan interest and property tax, after removing the standard deduction from the equation.

So waiting 1 more year could easily cost you over $20,000 over a 7 year period of ownership. Even if your monthly payment for owning a home is greater than your monthly rent, you need to consider the long term impact of renting vs. owning your home. The savings and potential to accumulate wealth when owning a home is worth much more than you might have realized.

If you or someone you know is contemplating a home purchase, but thinking of waiting another year, you need to encourage them to move now while interest rates are still low. Give me a call to help get started today.