SHOULD I SAVE 20% FOR A DOWNPAYMENT OR BUY NOW?

THE WAIT COULD COST YOU. WE EXPLAIN...



A question that we've been asked frequently is if "I should save 20% down before I buy, or go with 10%?" If you're a ready and able buyer - the truth is, you shouldn't wait. We reverse engineer why if you are considering buying a home, you may want to jump in sooner than later. 

1. APPRECIATION

So, one of the benefits of having 20% down is to avoid private mortgage insurance. The truth is, if real estate is appreciating in the 10-12%'s, then there's no reason for you to try and avoid it. You'll be making more money in equity through appreciation, then what you'd be "saving." For example - $750,000 house, 10% growth = $75,000 increase in value. There's no way you'll be paying $75,000 in private mortgage insurance. 

2. RISING INTEREST RATES

Again, interest rates are RISING. We've already gained almost 1% THIS YEAR. Experts say, it's projected to continue to grow. As interest rates go up, your purchasing power goes down SIGNIFICANTLY. Another example - just 1% rise in interest rates can affect your purchasing power by 9-11%! This is crazy. 

In conclusion...

If you're a ready, willing, and able buyer - then the time is really now to think about buying. If you don't have the 20%, you're fine. You can get the PMI removed at a later time, if that's your issue. The fact is - you're missing out on a lot of money if you continue to wait. Appreciation + rising interest rates = purchasing power affected DRASTICALLY. That $500,000 house could turn into a $600,000 house very quickly. 


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