Which is more important: Your home’s price or its cost?
Wait. Are those not the same thing? we hear you asking. Actually, no. While they both reflect the amount of money you’re putting into your home, these two terms have very different technical connotations.
Okay, so what’s the answer, then? The truth is, it depends. Are you buying a home or selling your home? What are your short-term and long-term goals? Find out everything you need to know about your home’s price versus its cost, below.
What’s the Difference between a Home’s Price and Cost?
We have often talked about the difference between a home’s price and its cost.
As a seller, you should be most concerned about “short-term price.” This number reflects where home values are headed over the next six months. Focusing on the short-term price of your home allows you to price it competitively for the current market in your neighborhood. And by pricing your home to sell, you’ll see more views online, more showings in person, and more offers come through the door.
As a home buyer, the short-term price is important, but it should not be your main concern. Instead, you should focus on the “long-term cost” of the home. Many factors go into your monthly mortgage payment, including the price of the home, your interest rate, and any down payment monies you contribute to the purchase. Your interest rate changes how quickly you pay your home off. And depending on the rate, you could pay tens of thousands of dollars more over the life of your mortgage.
How do I Keep the Cost of My Home Low?
Recently, we reported that with interest rates holding at historical lows, your purchasing power is high despite the fact that prices have been increasing for a long stretch. In fact, it’s safe to say that homes are more affordable now than anytime since 2012.
Not convinced that interest rates affect long-term affordability? Consider that over a 30-year mortgage, you make 360 payments. Even a 0.25% interest rate difference on a $300,000 home can equal big money over that many payments. (In fact, it’s a difference of more than $15,000!)
So, bottom line: Combining low purchase prices with low interest rates will give you the lowest costs over the lifetime of your home loan.
Where are Home Prices and Costs Going in 2020?
Real estate experts at Freddie Mac forecast that the average 30-year fixed-rate mortgage rate for 2020 will remain at the 3.8% rate that we’re seeing in the fourth quarter of 2019. However, Freddie Mac predicts a 3.0% increase in home prices over the next year.
Here is a simple demonstration of what impact these projected changes would have on the mortgage payment of a home selling for approximately $300,000 today:
Save on Price and Cost by Buying Now!
If you’re ready to move up to your dream home, now could be the best time for you to sell and make your move.
At Beverly-Hanks, we strive to make financing real estate easy and enjoyable. That is why we are staffed with local financing professionals dedicated to prompt, personal service. You will find we offer a broad menu of financing options, very competitive rates, and customer service that is second to none.
Contact one of our Beverly-Hanks Mortgage Services loan officers today!