Buy now, save in interest

Fewer listings are coming on the market each month. Sales, even though low, are increasing each month. There still is a great deal of inventory in Brevard County, but if buyers wait too long to move forward, the price might be a good one, but it will cost more.

Let me explain.

Binki Kaiser, a renowned real estate expert, states that 94 percent of buyers in today's market find their homes on the Internet, investigate the neighborhoods, then make appointments with their agents. Today's buyer is particular, knowledgeable and striving for a good deal.

The buyers of today weigh renting a home vs. purchasing a home. They look at the low price of rentals and are enticed by the property they could rent. Today's buyer may be taking too long to make a decision, Kaiser says.

Mortgage rates just dropped. The rate will undoubtedly increase again soon. The struggle for the buyer is to get the best price. If he or she waits too long and the interest rate increases, it will cost this buyer more money, in the long term.

Using a 6.5 percent interest rate and a $325,000 mortgage, this example is "principle and interest" only. Taxes and insurance costs vary according to the home being purchased.

A 30-year mortgage with a 6.5 percent interest rate will cost the buyer an estimated $2,054 per month.

If the buyer waits and then decides to purchase the same home with the same term, but a 7.5 percent rate, this same $325,000 mortgage will cost the buyer an estimated $2,272 per month. The difference is $218 per month.

The buying power of the 6.5 percent interest rate vs. the 7.5 percent interest rate is best viewed as paying $34,500 more for the home if he or she waits and the interest rates jump back to 7.5 percent. That is, if the interest rate stays at 6.5 percent, one can finance $34,500 more, possibly roll the price of a new pool into the loan, and have the same payment as the 7.5 percent mortgage in the original amount of $325,000.

This is what cost vs. price entails.

To review this difference over 30 years, using the same mortgage amount of $325,000, the home with the 6.5 percent mortgage is paid out over the life of the loan in an amount estimated at $739,440. The 7.5 percent mortgage paid over 30 years totals an estimated $817,920. Now, the cost of this home is more than $78,480.

Buyers in today's market not only need to look at mortgage rates and low real estate prices but buyers need to understand the added advantage of buying over renting.

The government rewards us with tax deductions on mortgage interest and real estate taxes. One must review the vulnerability of rental rates increasing year to year versus the write-offs on income tax.

Buyers in this market have a great deal of investigating to do and if they are smart buyers, they will do it.