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Eric Niehoff   –   Mortgage Loan Originator   –   NMLS 2240947   –   #EricTheRedMLO – Eric The Red MLO

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Keep Renting or buy a home?

By EricIn UncategorizedPosted 0 Comment(s)
Rent or Buy
If home values rise while you wait for rates to fall, you may not save as much on your payment as you’d think. And you’ll spend a lot of money on rent!
Consider these examples of initial principal & interest payments on a hypothetical 30 year fixed rate mortgage of $400,000 compared with a payment one-year later after rates have dropped and values have risen.
One-point drop in rates, 5% appreciation:
Loan Amount:
$400,000
$420,000
Interest Rate/APR*:
7.375/7.719%
6.375/6.694%
Principal & Interest*:
$2,762.70
$2,620.25
Savings*: $142.45
Let’s assume you pay $2,000 in rent for the 12 months you wait. In the first scenario, it would take 168.5 months or 14.0 years of payment savings to recoup your rent cost. Plus, instead of paying the extra $20,000 at sale, you would have earned an average of $1,667 in equity each month.
Two-point drop in rates, 10% appreciation:
Loan Amount:
$400,000
$440,000
Interest Rate/APR*:
7.375/7.719%
5.375/5.672%
Principal & Interest*:
$2,762.70
$2,463.87
Savings*: $298.83
In the second example, it would take 80.3 months or 6.7 years of savings to recoup your rent. And instead of paying an extra $40,000 , you could have been earning an average of $3,333 in equity per month.
If you have the ability to buy now, waiting for a better rate could cost you. Reach out if you’d like to discuss your options.

The figures above do not represent actual terms being offered and are provided for illustrative purposes only. Please consult with us for an estimate specific to your scenario.

Interest Rate/APR: The sample rates shown are neither an advertisement, an estimate, nor an offer to lend. The annual percentage rate (APR) is the cost of credit over the term of the loan expressed as an annual rate. The APR shown is based on the interest rate and costs equal to 3% of the loan amount. It does not take into account any other loan-specific finance charges or mortgage insurance you may be required to pay. Rates are for illustrative purposes only. Actual rates may vary.

Principal & Interest: This is the monthly principal and interest payment based on the term, selected loan amount and interest rate. Payments for taxes, insurance and MI/PMI are not included.

Rent Paid: Monthly rent.

Savings or Increase: This is the difference between the two monthly principal and interest payments.

Equity: This is the difference between the current value of your home and the outstanding mortgage balance.

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Eric Niehoff
303-521-2171