Waiting For Your Current Home's Value to Rise Could Cost You Hundreds of Thousands of Dollars

A recent study revealed that the number of existing home owners planning to buy a home this year is about to increase dramatically. Of these home owners, 75% are considered to move up buyers. These buyers are looking for a larger and/or higher valued home.

Although we don't know exactly what will happen to the market in the year ahead, we can look at what has happened in the past year. The following is an example of buyers who waited one year to purchase because they were waiting for the value of their current home to rise before buying:

Assume these owners had a home worth $300,000 and were looking at a home priced at $450,000. At 10% down they would get a mortgage for $405,000. By waiting, their house appreciated by approximately 10% over the last year (based on the Case Shiller Pricing Index). Their current home could now sell for $330,000. That would mean an additional $30,000 in equity assuming they didn’t incur any repairs by waiting one year to sell the house.

But because they waited, the new $450,000 home would now be worth $495,000 (10% more). Adding the original 10% down payment ($45,000) to the $30,000 in proceeds they received from the sale of their house, they would now have a $75,000 down payment. So, they would now need a mortgage of $425,000.

Here is a table showing what additional monthly cost would be incurred by waiting:

SO, BY WAITING, THE HOMEOWNERS MUST PAY $305.85 MORE EACH MONTH FOR THE LIFE OF THE LOAN. FOR A 30 YEAR LOAN, THIS EXTRA WOULD EQUAL A TOTAL OF $110,106. AND, ALL FOR WAITING 1 YEAR.