Buy Now vs. Wait Calculator

Buy Now vs. Wait Calculator

Buy Now vs. Wait Calculator Aids Decision-Making

For buyers searching for a home in Wilmington, North Carolina, deciding whether to buy now or continue renting can be a difficult decision.  Luckily, a unique online tool is being offered to help decide whether it is better to wait or buy a home now.  The calculator can help with a number of complicated questions, such as:

·         How much more expensive will it be to buy now with a lower down payment?

·         What are the financial implications of waiting to buy until it’s possible to put down 20 percent?

With a variety of parameters that can be adjusted to your unique financial situation and predictions for the future, the buy now vs. wait calculator is a highly effective tool for making decisions.  The down payment amount, target purchase price, allotments for monthly rent and savings, and potential interest rate for the mortgage are some of the factors that can be modified.

For annual appreciation, the default setting on the calculator is at three percent, which is a very conservative number.  In fact, the Wilmington real estate market has experienced rapid price appreciation over the past two to three years, with the numbers hovering at around 20 percent annually.  Of course, this is not an average number for price appreciation.  Instead it is more a reflection of an extremely hot real estate market.

The average for price appreciation is approximately eight percent nationwide.  This is a number the average Joes and professional economists came up with by shaking a magic eight ball, or possibly the realization that, over the decades, years of 20 percent annual appreciation are balanced out by years of downturns and recessions. 

With that in mind, it is easy to understand why many believe the default setting of three percent annual appreciation is a conservative number.  This makes a compelling argument for purchasing a Wilmington, North Carolina home now instead of waiting, because the calculator shows that it is more expensive to wait if the settings are kept at three percent appreciation.    

So why do people choose to wait and continue throwing their money in the form of rent every month?  One reason could be the misguided notion that purchasing a home requires a down payment of 20 percent. 

A misguided belief that it’s necessary to have a 20 percent down payment to purchase a home is a likely explanation for why people choose to wait.  According to a survey performed by the National Association of Realtors, roughly 87 percent of people who are not classified as home owners believe that purchasing requires a minimum of a 10 percent down payment.  Nearly 40 percent even believe they will need more than a 20 percent down payment to purchase a home.

That may have been the case in the 1950s, but there are many financing options that are much more flexible these days.  It is now possible to get a fixed rate 30-year mortgage with as little as a down payment of one to three percent, with the next increments at five and 10 percent. 

Even if a borrower is nearly in a position to make a 20 percent down payment, funneling the cash into other investments could be a better strategy.  Real estate is almost always a great investment, though one of the biggest drawbacks to investing in real estate is that of liquidity.  It can take a while to sell a home compared to other investment vehicles.  Saving down payment funds can allow an investor to minimize risk through the strategy of diversification, but I digress. 

The fact that is now possible to use a smaller down payment compared to other eras is another point in favor of purchasing instead of waiting.  When it’s cheaper or about the same price to purchase as it is to rent, it is always in an individual’s best interests to buy.  Real estate is one of life’s basic needs.  An individual who decides to buy ends up with a roof over their head at the end of the loan.  A renter is never free from the necessity of paying a landlord. 

It is basically guaranteed that renting and waiting to purchase will be a more expensive option, if interest rates on mortgages and home prices continue to increase as predicted.  The buy now vs. wait calculator shows that the best option is to purchase a home instead of renting, provided that the current economic projections remain true and the defaults are kept in place. 

For more information about how to make the best decision to fit your goals and dreams for the future, call Fritts Causby at 858-692-5120 or email frittscausby@gmail.com.