The Cost of Waiting to Buy a Home Today vs. Buying in a Year

Introduction

The decision to buy a home is one of the most significant financial choices you’ll ever make. It involves a complex web of factors, including your personal finances, market conditions, and your long-term goals. Among these factors, timing is crucial. In this article, we will look at the cost of waiting to buy a home today versus buying in a year, shedding light on both the advantages and disadvantages of each choice.

Buying vs Waiting

When you are comparing buying a home now to waiting in the future, it is important to consider the real estate market conditions, interest rate levels and your own personal financial situation. Just like the experts cannot time the stock market, it is nearly impossible to find the perfect time to buy real estate with the lowest rate. Like any financial asset, it is best to buy real estate at regular intervals so that you find the home ownership financially rewarding. When it comes to your personal financial situation, it is hard to argue that renting has any financial benefit at all.

If you want to get to the bottom line and see the numbers, check out the CASE STUDY below!

Buying Today

1. Locking in Known Market Conditions: Buying today allows you to lock in current market conditions, ensuring that you are not subject to markets moving. You may think that property values are too high, but they may become higher next year. The same goes for interest rates. You may not like the rate today, but it could be worse tomorrow. If rates do drop in the next year, you can always refinance your mortgage.
   
   
2. Building Equity Sooner: One of the primary advantages of buying today is that you start building equity in your home immediately. This can be a significant asset for your long-term financial stability. The sooner you buy, the sooner you start building equity in your home. In the current market conditions, your home equity may grow 5-10% in one year. If home prices do drop in the future, your housing payment will not change and you can just enjoy your home.

• Tax Benefits: Homeownership often comes with tax benefits, including deductions for mortgage interest and property taxes, which can reduce your overall tax liability. Although many tax benefits for home ownership have gone away, there is absolutely no tax benefit to renting.

• Predictable Housing Costs: Fixed-rate mortgages offer predictability to your monthly housing payment. Your monthly mortgage payment remains the same over the life of the loan, making budgeting easier. On the flip side, rents can change at every lease renewal and your landlord may tell that you must find a new home when your lease is up.

Waiting to Buy

1. Market Fluctuations: Real estate markets are constantly in flux. While home prices may be high today, they could rise even further in a year. On the other hand, a market correction could lead to lower prices. While you are waiting to see where prices go, you are paying rent each month that you can never get back. The supply of homes is limited, and it can change rapidly. If you wait, your dream home may not be available when you finally decide to buy. Does this feel a bit like gambling???
   
   
2. Interest Rates: Mortgage interest rates are subject to change. Waiting a year could mean a rise in interest rates, potentially increasing the overall cost of your home. Similarly, mortgage rates may drop in a year which could save you a bunch of money on your payment. Because it is impossible to predict interest rates, you are waiting to find out what your housing payment will be……and paying rent every month.
   
   
3. Saving for a Larger Down Payment: The additional time could allow you to save more for a down payment, potentially reducing your monthly mortgage payments. This is a great idea if you think that that you will receive a cash windfall in the next year from a work bonus or inheritance. If there is no chunk of cash coming in the near term, be careful of waiting too long to get your desired down payment in the bank. If it takes years to build up your down payment, then you are missing out home equity growth and wasting a ton of money on rent. You should discuss options with your Lakeside Bank mortgage loan consultant.

• Improved Credit Score: If your credit score isn’t where you want it to be, waiting can provide an opportunity to enhance your creditworthiness, which could result in a better interest rate. Please make sure that you have a plan in place to reach your desired credit score. Buying a home and paying your mortgage on time will give your credit score a nice bump for the next home. Waiting too long to improve your credit means that you can miss out on building home equity and are still wasting money on rent.

A Case Study: The Cost of Waiting

What matters most to you??? — getting a lower rate today or building home equity for your future. Mortgage rates are high. So…..should you Wait or BUY?

• OPTION 1: Wait until rates come down. Let’s say rates drop 1% in a year. With rising property values, you won’t save much on your monthly payment, and you missed out on lost equity growth.
  
  
• OPTION 2: Buy now and lock in today’s home price….and watch the value of your property grow. If you can refinance in the future, buying now looks even better.

Here’s an example. Let’s assume that you home appreciates by 10%….and compare that to waiting for a 1% drop in mortgage rates. By waiting you may have lost up to $36,000 in equity! In just one year!

	Purchase Price	Rate	Monthly Payment	Equity Summer 2025
Buying Today	$400,000	6.25%	$2,217	$80,000
Buying in 2025	$440,000	5.25%	$2,186	$44,000
		Difference	$31	$36,000

Conclusion

The decision of whether to buy a home today or wait for a year is a complex one. It involves market dynamics, financial considerations, and your personal circumstances. While waiting may offer the opportunity to save for a larger down payment or improve your credit score, it also comes with the risk of higher home prices and interest rates. And you are still wasting money on rent! Buying a home today can provide the advantage of locking in known market conditions, building equity sooner, and enjoying the potential for home appreciation.

Ultimately, the cost of waiting to buy a home versus buying immediately depends on your specific situation and priorities. It’s essential to carefully evaluate the pros and cons, consider market trends, and consult with financial experts to make an informed decision that aligns with your long-term goals. Contact your Lakeside Bank mortgage loan consultant to begin weighing the costs and benefits of home ownership.