Should you buy now or wait and save? Here’s what to consider.
Should you sell now and take advantage of low interest rates for your next home purchase or hold onto your home, save money, and purchase at a later date? The answer boils down to two questions:
1. What’s your long-term strategy? Will you eventually buy another property and get into the rental game? Would you rather just save money now because it’s the right thing to do? As stated above, selling now means taking advantage of lower interest rates and lowering your mortgage payment, which brings us to our next question… 2. If rates change, will saving and having a higher down payment give you a lower monthly mortgage payment?
The advantage of saving now is going into your next purchase with a higher equity position for your down payment. If you’re financing the remaining cost, that will result in a lower monthly payment. If you plan on selling that next home anyway, you’ll be in a better position to pull the down payment and equity out of the home and make an even larger down payment for your next home. If interest rates rise, though, the money you save may not net you a lower monthly payment. Usually, a one-point drop in interest rates can give buyers significantly more buying power.
“It’s hard to save faster than what interest rates will give you.”
Interest rates are lower than they’ve ever been, but with the current political situation, that could change soon and cost you money down the line. It’s hard to save faster than what interest rates will give you. By taking advantage of rates now, you know for certain that you’ll get a lower monthly payment and have more buying power, especially if your debt-to-income ratio is in line.
So again, what’s your long-term goal? If you already have a home you plan on turning into a rental, you can build your rental portfolio faster and have a renter start paying down your principal. If just that renter is paying down your principal, though, you may not be able to save as fast as they can pay it down.
The bottom line is that there are a lot of things you can do outside of just saving money that will help you secure a better equity position later.
If you have questions about this or any real estate topic, don’t hesitate to reach out to me. I’d love to speak with you.
