Do You Realize How Little $1000 Costs You Per Month?

Do You Realize How Little $1000 Costs You Per Month?

Let’s talk about a little bit of perspective. As you’re working through a real estate contract, there’s going to be some give and take. There’s going to be some negotiation. Especially around things like the inspection. As the buyer, when your inspector goes through the property, you might find some things that you want to get fixed or get compensation for. As a seller, this is something that you have to decide if you’re willing to pay for or give up.

So I wanted to talk a little bit about some perspective on how much these things ultimately cost you. And to get that perspective, I wanted to talk about it in the sense of how much $1,000 costs to borrow on your mortgage. Do You Realize How Little $1000 Costs You Per Month?  So I’m talking from the lender’s perspective, so we work with buyers. And from a buyer’s perspective, let’s say you ask the seller for, I don’t know, $2,000 worth of repairs. And they only agreed to $1,000 worth of repairs. So in your mind, you’re losing out on $1,000.

Do you really want to let the deal go sideways, and have the contract fall out, and have to start all over because of $1,000? Let’s talk about how much $1,000 costs if you end up borrowing it in your mortgage. So if you’re not seeking mortgage insurance, if you borrow a $1,000, and let’s say your interest rate on the loan is 3%. Now, that’s not a rate quote. Rates vary from day-to-day, I’m just using that number to illustrate what I’m talking about.

A 3% rate translates to a little bit over $4 per month on your monthly payment, and that’s on a 30-year mortgage. So think about that. There’s a lot of Starbucks drinks that cost more than $4 per month. So do you really want to give up that house that you’ve set your mind on, and you’re envisioning your family moving into over $4 a month? Even if it’s, let’s say it’s $3,000 you lose out on. That’s $12 a month. It’s certainly not a humongous number in the scheme of things when you’re talking in Denver, the average home is over 500,000 right now. So, consider that.

Now, if you’re putting less than 20% down, or you’re getting an FHA loan, it’s more like $5 a month. So, still not a gigantic number in the scheme of things. So, just a little bit of perspective on how that looks as you’re considering your options on these negotiations. Whether or not to accept it, or to cancel your contract.

And here’s another thing to keep in mind too. Historically, if you look back many, many decades, Denver has an appreciation rate of over 5%. Something like 5.5%. But let’s just use 5% as an example. And let’s say you’re buying a $500,000 home. That means that same home in a year will be worth $525,000. So in other words, if you cancel your contract because the seller’s not willing to give you $2,000 or $3,000 for inspection repairs, you’re actually losing that appreciation, that $25,000, over $2,000, or $3000, or $1,000.

So just a little bit of perspective to keep in mind, and especially with how hard it is right now to get a house under contract, to find a house where you have the seller accept your offer. Just think about those numbers as you’re negotiating these things. And of course, I’m here for you, to calculate that out for you, to look at your specific situation because I know every situation’s different.

Call me if I can help you out with anything related to that or anything else loan related. And always here for you to answer your questions. I definitely don’t mind the calls, emails, or texts. You can reach me at 303-670-0137 or baxterteam@fairwaymc.com.