BUYING A HOME SHOULD CONSIDER COST VERSUS PRICE

This has been mentioned before in this newsletter, but bears repeating... Unless you are paying 100% cash, the cost to you of a home is more important than the price.  Why?  The amount you pay in interest for the money you borrow, i.e. your leverage, is what is going to cost you the most during the time you own your property.  Being able to borrow that money at 3 or 4 percent, as opposed to 6 or 8 percent, obviously would make a huge difference over the course of 10 years.  It will have far more impact than whether you paid $450,000 for the property or $465,000.  For example, let's say you buy a property for $450,000.  If you secure a loan of $400,000 at 3.5%, your payment will be $1,796.  Let's say you really want to buy that property at the rock bottom point in the market.  You wait and manage to secure the same property for $400,000, a $50,000 reduction.  Now, however, interest rates have gone up.  You now secure a loan for $360,000 but at 5% interest.  Your payment is now $1,933.  If you own the home for 10 years, that's a lot of extra money that could be going for something else.  Only cash is king on price.  Otherwise, look at your cost.