How to Save $57,000

How to save $57,000

We recently had customers tell us they planned to wait till next year to build. I did a quick calculation of their likely mortgage payment and sent them an e-mail pointing out that a likely one percent increase in interest could cost them almost $57,000 over the life of the loan; or $157.50 per month. Now if they could afford that $157.50 per month they could invest that much each month and it could turn into over $200,000 by retirement age, plus their home will be paid for. They responded the next day and have decided to build now.

A one percent increase in mortgage rates will cost you $100.00 per month on a loan of only $159,000. Why wait if you can qualify now? If you go on the Internet and type in “Saving Calculator” in a search engine, you will find an easy way to figure out how much you need to save to reach any goal. I put in the $100.00 per month for 30 years and was optimistic and used a 8% return. That resulted in $150,000 in additional retirement funds resulting from investing the $100.00 per month saved on the mortgage payment.

Most economists believe that interest rates will increase. No one knows how much or how soon. History proves that after a recession or deflation you will have both inflation (price increases) plus rising interest rates. This happens no matter who’s in control in Washington. I often hear people expressing fear about inflation due to deficit spending by the federal government for most of the last ten years. It is a real concern. What can we do? One of the top real estate agents in town told me she bought eight properties last year. She knows what to do. Buy low and sell high. The simplest way to deal with the risk of inflation and rising interest rates is to buy, finance as low as possible, and ride the wave.

I know a few people have helped their children buy homes at low prices in order for them to get the $8,000 Tax Credit. What they save on interest likely will far overshadow the tax credit. Plus, as prices increase they are building wealth. We see many families who have not put their home on the market, waiting for the market to improve.

Are they waiting for higher interest rates thinking this will help them sell? Then they can get a loan and buy, also at a higher rate. Actually this is exactly what happens. When prices and interest rates are falling people wait. Very few catch the bottom. Then, when prices and rates start climbing the fear of missing out kicks in and people buy. Lenders and sales agents do not mind seeing slight increases in rates as that is a motivator.

The readers of newspapers, this newspaper, and this column are usually educated, successful people. This may be a once in a lifetime opportunity for

many of you to take action. That’s really the economic stimulator that works.

And remember, to qualify for the $8,000 Tax Credit for first time homebuyers or the $6,500 Tax Credit for repeat buyers, you must have a signed, executed contract to purchase a home by April 30, 2010. Then, you must close on the new home no later than June 30, 2010.  If you are interested in qualifying for these Tax Credits you MUST find a home and contract to purchase it in the next t2 days!

For over 40 years the staff at The Groce Companies has helped consumers in central North Carolina design, build and secure financing to build or buy their homes.  If you need assistance, please call (919) 775-1497 and visit our web site, www.grocecompanies.com where we will be posting this entire series of helpful hints.