Stand back, all my darling practical piggies, because I'm going to do math for you again and it's going to be fabulous.
Today's delicious math is performed with the end goal of explaining why you really do need to shop around for your mortgage, and why you need to do so before you start shopping for a home with a Realtor.
See, if you're buying a home and I'm representing you, my job is to negotiate the lowest possible price. We Realtors do pretty well at the whole negotiation thing. According to MRED's MLS, the final sale prices of homes in Chicago over the past year have been about 10% less than their final list prices. 10% is nice. I got 25% off for one of my buyers this year and felt pretty darned pleased with myself for doing so, but it was a special & extreme circumstance.
But the true cost of a home isn't just the purchase price. What about the closing costs and interest payments that you'll rack up over the life of your loan? Unless you're paying cash only, you're going to be paying out quite a bit more for the privilege of borrowing someone else's money. I do everything I can to get you the lowest purchase price, but how much you actually pay? That's up to you.
By planning ahead, saving a good down payment and working the details of your mortgage you could save 9% on the total money spent after just 5 years in your home. By year 10 that savings is up to 21%. If you stayed in the home for the full life of the loan you would save 35%. That's more than you'd save in any sort of negotiations over the actual purchase price, and definitely more than the piddly 2.5 to 3% you'd purportedly save on just the purchase price by going without an agent at all. (more…)