Hi, I'm RJ Baxter with Intercap Lending, and I'm following up last week's video where I talked about the real estate report card. And I showed you the report on the zip code 80203, which is a zip code in Denver County, Colorado. And there's a lot of interesting data on that report card. A couple things were the median home price, which was 791 in the area, and also the forecasted appreciation. It showed that same $791,000 home would appreciate to over a million dollars in five years. Now, no one has a crystal ball, but if that forecast holds true, that same home would be worth over a million dollars. So I wanted to talk a little bit about what your payment might look like and what's the true cost of waiting until next year to buy a home.
Like, what happens if you wait until rates go down? Are you going to be in a better position or a worse position? So let's take a look at that. This is a cost of waiting analysis, and it's just kind of an extension of last week's report. And I did it based on that $791,000 home. And you can see down below, I started off with a loan today, a 7.85% interest rate, and forecasted it out six months, one year, two years and three years. And just assumed that rates will be down to 7.375 in six months and then 6.87 five for the next three years. Now we'll see if that happens. I think rates are likely to go down at some point in the future, but no one knows when. But let's just assume this is the case.
And there's a lot of people telling me right now that they're waiting for rates to come down before they buy a home. So let's take a closer look at what this looks like. So down below we have some graphical information. So you can see here, this is the property value over time on the appreciation. So just on year three, even you're over 900,000 on that home price. Absolutely crazy. The kind of wealth you can build by owning a home and your payments over time. Now, of course, the payment is going to go down some because the rate went down kind of level from six months to one year, probably because that home is appreciating so much. And then it starts to go up because you're paying more for the house in years two and year three.
And then the next chart shows the closer analysis. So the payment difference, if you wait six months, your payment is $200 lower. That's great. Waiting one year, your payment is $204 lower than it is today. Waiting two years, your payment is only $46 a month higher because rates are lower, but you're paying a lot more for the house. And if you wait three years, your payment is actually $293 a month higher. Even though rates are lower, you're going to lose some money in cash flow. In other words, you're going to gain $2,300 a year if you wait six months. So that's good. But in three years you're going to actually be spending $3,500 more per year to own that house. But check this out, loss in Property appreciation. So you're going to lose $46,000 by waiting for a year to buy that home.
You're also going to lose $6,400 in amortization. So in other words, part of your mortgage payment goes towards the principal balance of the loan. So every payment knocks down what you owe in that loan a little bit. So that's what this number represents. And if you project this all the way out to three years, you're going to lose $122,000 in appreciation and almost 21,000 in amortization lost. So if you add up all these numbers, the total cost of waiting, 53,000 you're going to lose if you wait one year, that's what is that, 4000? 4500 per month? Crazy. If you wait two years, you're going to lose 98,000 and waiting three years will cost you $143,000. So one more chart to look, or actually a couple more charts to look at.
Cost of Waiting this is the graphical representation of these numbers so you can kind of see that more in a picture format and then additional cash required. So this is more down payment that you're going to need over time because the house is more, so you got to put more down as a percentage of the home. And these numbers are based on 5% down and then loss in cash flow. You can see here it shows a graphical representation, so hopefully that helps you out. As you can see, real estate is a huge wealth creator and by not buying now, even though rates are high comparatively, you're going to lose a lot of wealth you're going to build over time. And remember, like I said before, there's a lot of people waiting right now.
So if you wait, you could be in a much more competitive environment where the home price is bid up. So I hope that helps you. Give me a call if you have any questions, text me or email, I'm always happy to help and you have a great rest of your day.
Learn More Here: http://www.cohomesandloans.com
RJ Baxter
Intercap Lending
http://www.cohomesandloans.com
303-670-0137
baxterteam@intercaplending.com
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