So, you’ve heard prices are “down” on the Garden Island of Kauai, and you are not sure whether you should “wait and see” if the prices plunge further, or buy now to take advantage of current interest rates. How do you decide?

No one has a “crystal ball” and can predict when “prices have bottomed out”, or what interest rates will do. However, to simplify the decision of buying now vs waiting, let’s look at recent market trends on Kaua`i.

In general, Kauai real estate prices have been adjusting slightly downward since late 2005. For the most part, the market continues to appear stable, with Sellers more flexible & Buyers making thoughtful purchases.

Meanwhile, mortgage interest rates continue on a slow upward trend, with weekly rate monitoring advised. In light of increasing mortgage delinquency, lenders have tightened mortgage approval guidelines.

For the sake analyzing a lower purchase price vs higher interest rates, here are 3 mortgage calculations:

Mr. Keone purchases his home for $450,000, makes a $150,000 down payment and secures a loan for $300,000 securing a 30-yr fixed mortgage at 6.0%

Principal borrowed: $300,000.00
Annual Payments: 12
Annual interest rate: 6.00%
Monthly Payment amount: $1798.65

Total Repaid at the end of 30 years: $647,514.00
Total Interest Paid over 30 years: $347,514.00
Interest as percentage of Principal: 116%

Mr. Keone purchases his home for $425,000, makes a $150,000 down payment and borrows $275,000 securing a 30-yr fixed mortgage at 6.75%.

Principal borrowed: $275,000.00
Annual Payments: 12
Annual interest rate: 6.75%
Monthly Payment amount: $1783.64
Total Repaid at the end of 30 years: $642,112.12

Total Interest Paid over 30 years: $367,112.12
Interest as percentage of Principal: 133%

Mr. Keone purchases his home for $425,000, makes a $150,000 down payment, and borrows $275,000 securing a 30-yr fixed mortgage at 7.0%.

Principal Borrowed: $275,000.00
Annual Payments: 12
Annual Interest Rate: 7.0%
Monthly Payment Amount: $1829.58
Total Repaid at the end of 30 years: $658,649.47
Total Interest Paid over 30 years: $383,649.47
Interest as a percentage of Principal: 140%

In conclusion, there are many more factors to consider than just the price paid for a property:

- Price of Property

- Amount Financed

- Cost of Financing

- Length of planned ownership (short term vs life of the loan)

When all aspects of the purchase are considered, you can make an educated decision on whether to buy now or wait. Good luck and happy analyzing!