Los Angeles Home Buyers, Should You Buy Now?

My good friend Gene Mundt, Professional Mortgage Banker with Chicago Bancorp, wrote a great post about whether now is a good time to purchase a home.  His arguments are very relevant if you are a Los Angeles home buyer sitting on the sidelines and waiting.

Have you been waiting for Los Angeles home sellers to drop their prices?  Are you waiting for just the right time – low prices combined with low mortgage rates?  Have you noticed that mortgage interest rates have risen around .75% over the past two months and the money sitting in your “interest-bearing” accounts is earning virtually nothing?  Have you thought about buying stock but realized that you should have bought it earlier because it has gone up about 10%?

Should I be buying a Los Angeles home now?

These figures that Gene put together should help you decide:

  • A  $10.00 per share stock  you could have purchased?  It now costs $11.00 per share.
  • Your dream home purchase and that $150,000 loan you were quoted?  The quote was a  4.25% interest rate  at the bottom of the rate market in ‘2010’.  That rate has now risen to  5%  and will cost you  $67.00 per MONTH more on your mortgage payment.
  • $10,800 MORE over 10 years in payments
  • $10,800 MORE over 10 years in payments

NOW … let’s extend these figures out even further. Let’s say you hope to be in your new home 10 years or more …

The $67.00 per month increase in payment you will now realize on your mortgage, means the following in actual dollars:

  • $    804.00 MORE per year in payments
  • $ 4,020.00 MORE over 5 years in payments
  • $ 8,040.00 MORE over 10 years in payments

Need more information?  Let’s now look at it from another angle …  your long term one …

  • Your total dollar monthly payment expenditure for a 30 year Fixed Rate Loan at 5% interest:  $289,983.00
  • The total dollar montly payment expenditure for a 30 year Fixed Rate Loan at 4.25% interest:  $265,647.00

Compare the two dollar amounts and you find that:

By waiting, you LOST the lower interest rate … and that lower interest rate would have saved you $24,336.00  over the life of your loan!

Right now, many mortgage experts are predicting that interest rates will rise an additional .25% during ‘2011’.  Some are predicting even higher increases.  What happens to your monthly mortgage payment, should that happen?  Again, let’s do the math based on the $150,00 mortgage and the  $90.00 per month increase you will realize with this new, higher interest rate:

$90.00 per month increase in payment on your mortgage means the following in actual dollars:

  • $  1,080 MORE per year in payments
  • $  5,400 MORE over 5 years in payments
  • $ 10,800 MORE over 10 years in payments

The above calculations should lead you to weigh your options carefully.

The longer you wait the higher the interest rate is likely to be.  There is no guarantee that Los Angeles home sellers are going to lower the price of thir homes, and it is extremely likely that the mortgage interest rate is going to rise.  The double whammy is that there is no guarantee that Los Angeles house prices are going to drop.  They are just as likely to go up.

So crunch the numbers.  Buying a Los Angeles home now, if you are ready, willing and able makes perfect sense.  If you see a house you love and can imagine living in it for more than 5 years, chances are that you will have made a great investment.

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4 thoughts on “Los Angeles Home Buyers, Should You Buy Now?”

  1. Awesome information for Los Angeles home buyers; solid statistics for those not only buying Los Angeles real estate but, all across the nation. We’re seeing prices rise as well as interest rates.

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