by Ron Sombilon Gallery

Article by Aashil Patel

Prospective home buyers who choose to wait “until prices come down further” are also gambling that interest rates will hold steady. What is not widely understood is the impact rates can have on the real monthly cost of home ownership. Even a 10 percent drop in home prices is immediately nullified by a mere 1 percent point increase in interest on a 20-year mortgage loan. By the way, this relationship between rates and home pricing remains essentially the same at any price point. Take a look at the following example:

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EXAMPLE CURRENT SCENARIO:

Home Price – Rs. 1,00,00,000Interest Rate – 11.0%Monthly Payment – Rs. 1,03,218

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SCENARIO 1:

Home Prices decrease by 5%Interest Rates increase by 0.5%

Home Price – Rs. 95,00,000Interest Rate – 11.5%Monthly Payment – Rs. 1,13,108

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SCENARIO 2:

Home Prices decrease by 10%Interest Rates increase by 1%

Home Price – Rs. 90,00,000Interest Rate – 12.0%Monthly Payment – Rs. 99,097

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As you can see, even relatively small fluctuations in property prices as well as rates can have either a surprising or a devastating effect on your monthly mortgage installments. Moreover, these fluctuations are becoming increasingly common in the new economy.

Therefore, real estate buyers, especially first-time buyers or rookie investors, should stay away from trying to time the market. Not only does it almost never work, but it certainly can’t be done from the sidelines. Only experienced property brokers and real estate agents, who are constantly in sync with the real estate market, are in a position to take advantage of the market.

In many areas of India, house prices have been overvalued in many so-called upcoming areas but in most regions the real estate prices are according to market value only. Postponing buying a home or land may lead to more rent expenses, losing opportunities in tax benefits and the risk of sudden price increases in future.

Although property prices follow a cycle of rise and fall, most of the time real estate prices continue to appreciate for long stretches of time. Waiting for a fall in prices may not save enough money to cover the appreciation of property prices, regardless of the amount. The best strategy for home buyers and new investors is to buy now a property which you can afford at this point of time.

Best practices evolved by RE/MAX’s 38 year experience of working in 84 countries are regularly portrayed and compared with demands of Indian customers. Specific knowledge sharing on how to establish a successful real estate broking office and earn profits in a sustainable fashion is the aim of the majority of property events organized by RE/MAX.

RE/MAX is always looking forward to spread knowledge in real estate broking, and continues to organise regular workshops and seminars for interested prospects and those wanting to become franchisees of a profitable business. Visit http://www.remax-mgm.com for more details.

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Halaby has been working with family financial matters since 1996 and is now President and CEO of Total Financial Solutions, Inc. He holds life, health, property and casualty insurance licenses and specializes in retirement planning. …
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