Which is preferable: lower interest rates or lower prices?

[nostradamus]

It also depends on how much you put down. If interest rates are high but you have a bigger down payment, with a lower price you get a bigger chunk of equity up front.

[an]

Also, it depends on how you want to look at a house. If you consider it as nothing but a home and just want to pay it off ASAP because you’re risk adverse, a low price would allow you to pay it off much more quickly. Then there’s the tax deduction you get from interest. With low price and high interest, you get to deduct more of your monthly payment.

[an]

Also, it depends on how you want to look at a house. If you consider it as nothing but a home and just want to pay it off ASAP because you’re risk adverse, a low price would allow you to pay it off much more quickly. Then there’s the tax deduction you get from interest. With low price and high interest, you get to deduct more of your monthly payment.

[an]

Also, it depends on how you want to look at a house. If you consider it as nothing but a home and just want to pay it off ASAP because you’re risk adverse, a low price would allow you to pay it off much more quickly. Then there’s the tax deduction you get from interest. With low price and high interest, you get to deduct more of your monthly payment.

[an]

Also, it depends on how you want to look at a house. If you consider it as nothing but a home and just want to pay it off ASAP because you’re risk adverse, a low price would allow you to pay it off much more quickly. Then there’s the tax deduction you get from interest. With low price and high interest, you get to deduct more of your monthly payment.

[an]

Also, it depends on how you want to look at a house. If you consider it as nothing but a home and just want to pay it off ASAP because you’re risk adverse, a low price would allow you to pay it off much more quickly. Then there’s the tax deduction you get from interest. With low price and high interest, you get to deduct more of your monthly payment.

[HeadedHome]

It depends.

For a $100K mortgage @ 6.0% (30 yr fixed, fully amortized), the payment (P&I) is abt $600.

For a $100K mortgage @ 7.0% (30 yr fixed, fully amortized), the payment (P&I) is abt $665.

To offset the difference in payment for an increase of 1.0% on the same loan, the loan amount would need to be reduced to roughly $90,250.

In other words, a 1.0% APR increase would necessitate abt a 10% reduction in the loan amount, to achieve the same payment (P&I only).

Obviously the above is very simplistic, and there are a myriad of variables that make every situation unique. Hope this gives a bit of clarity.

[HeadedHome]

It depends.

For a $100K mortgage @ 6.0% (30 yr fixed, fully amortized), the payment (P&I) is abt $600.

For a $100K mortgage @ 7.0% (30 yr fixed, fully amortized), the payment (P&I) is abt $665.

To offset the difference in payment for an increase of 1.0% on the same loan, the loan amount would need to be reduced to roughly $90,250.

In other words, a 1.0% APR increase would necessitate abt a 10% reduction in the loan amount, to achieve the same payment (P&I only).

Obviously the above is very simplistic, and there are a myriad of variables that make every situation unique. Hope this gives a bit of clarity.

[HeadedHome]

It depends.

For a $100K mortgage @ 6.0% (30 yr fixed, fully amortized), the payment (P&I) is abt $600.

For a $100K mortgage @ 7.0% (30 yr fixed, fully amortized), the payment (P&I) is abt $665.

To offset the difference in payment for an increase of 1.0% on the same loan, the loan amount would need to be reduced to roughly $90,250.

In other words, a 1.0% APR increase would necessitate abt a 10% reduction in the loan amount, to achieve the same payment (P&I only).

Obviously the above is very simplistic, and there are a myriad of variables that make every situation unique. Hope this gives a bit of clarity.

[HeadedHome]

It depends.

For a $100K mortgage @ 6.0% (30 yr fixed, fully amortized), the payment (P&I) is abt $600.

For a $100K mortgage @ 7.0% (30 yr fixed, fully amortized), the payment (P&I) is abt $665.

To offset the difference in payment for an increase of 1.0% on the same loan, the loan amount would need to be reduced to roughly $90,250.

In other words, a 1.0% APR increase would necessitate abt a 10% reduction in the loan amount, to achieve the same payment (P&I only).

Obviously the above is very simplistic, and there are a myriad of variables that make every situation unique. Hope this gives a bit of clarity.

[HeadedHome]

It depends.

For a $100K mortgage @ 6.0% (30 yr fixed, fully amortized), the payment (P&I) is abt $600.

For a $100K mortgage @ 7.0% (30 yr fixed, fully amortized), the payment (P&I) is abt $665.

To offset the difference in payment for an increase of 1.0% on the same loan, the loan amount would need to be reduced to roughly $90,250.

In other words, a 1.0% APR increase would necessitate abt a 10% reduction in the loan amount, to achieve the same payment (P&I only).

Obviously the above is very simplistic, and there are a myriad of variables that make every situation unique. Hope this gives a bit of clarity.

[Huckleberry]

Excerpt from a Mr. Mortgage newsletter.

Now bond yields and mortgage rates are soaring, which is an affordability wild-card housing prices can’t handle. Most analysts and economists make their housing predictions based upon an average 30-year fixed rate over many years or the present rates, both of which are historically low and have been since 2003 (see chart below). Turning around this trade, with inflation levels that make owning Treasuries a money-losing proposition and rate overseas leading the way, maybe next to impossible. Rates are going up and arguably have been far too low for far too long.

In the past month, rates on a 30-yr fixed mortgage at no points have soared from 6% to 6.75%. When rates rise, affordability falls. Every .25% increase in mortgage rates takes away approximately 2.5% in purchasing power. Therefore, roughly 7.5% of purchasing power has evaporated in the past month. This, of course, varies from individual to individual, but assumes a household with a steady income buying at the maximum allowable debt-to-income ratios, which is typical.

People are focusing so much on the loss of loan programs and tightening of guidelines and have completely forgotten about one of the most basic of housing affordability factors, mortgage rates. This is, unless they plan to pay cash.

If rates climb back to levels last seen in 2000 and 2001 (7.5% to 8.5%), an additional 7.5%-12.5% purchasing power could evaporate. In the past, mortgage rates were a leading indicator for home prices and the health of the housing market in general. Now, that the days of free money and ‘heartbeat loans’ are over, ‘old-school’ factors like employment, income levels, interest rates, consumer sentiment and the health of the broader economy will have a significant influence once again.

Average 30-yr Rates at No Points

Today’s Rate 6.750%
YTD 2008 6.375%
2007 6.750%
2006 6.750%
2005 6.250%
2004 6.250%
2003 6.250%
2002 7.000%

[Huckleberry]

Excerpt from a Mr. Mortgage newsletter.

Now bond yields and mortgage rates are soaring, which is an affordability wild-card housing prices can’t handle. Most analysts and economists make their housing predictions based upon an average 30-year fixed rate over many years or the present rates, both of which are historically low and have been since 2003 (see chart below). Turning around this trade, with inflation levels that make owning Treasuries a money-losing proposition and rate overseas leading the way, maybe next to impossible. Rates are going up and arguably have been far too low for far too long.

In the past month, rates on a 30-yr fixed mortgage at no points have soared from 6% to 6.75%. When rates rise, affordability falls. Every .25% increase in mortgage rates takes away approximately 2.5% in purchasing power. Therefore, roughly 7.5% of purchasing power has evaporated in the past month. This, of course, varies from individual to individual, but assumes a household with a steady income buying at the maximum allowable debt-to-income ratios, which is typical.

People are focusing so much on the loss of loan programs and tightening of guidelines and have completely forgotten about one of the most basic of housing affordability factors, mortgage rates. This is, unless they plan to pay cash.

If rates climb back to levels last seen in 2000 and 2001 (7.5% to 8.5%), an additional 7.5%-12.5% purchasing power could evaporate. In the past, mortgage rates were a leading indicator for home prices and the health of the housing market in general. Now, that the days of free money and ‘heartbeat loans’ are over, ‘old-school’ factors like employment, income levels, interest rates, consumer sentiment and the health of the broader economy will have a significant influence once again.

Average 30-yr Rates at No Points

Today’s Rate 6.750%
YTD 2008 6.375%
2007 6.750%
2006 6.750%
2005 6.250%
2004 6.250%
2003 6.250%
2002 7.000%

[Huckleberry]

Excerpt from a Mr. Mortgage newsletter.

Now bond yields and mortgage rates are soaring, which is an affordability wild-card housing prices can’t handle. Most analysts and economists make their housing predictions based upon an average 30-year fixed rate over many years or the present rates, both of which are historically low and have been since 2003 (see chart below). Turning around this trade, with inflation levels that make owning Treasuries a money-losing proposition and rate overseas leading the way, maybe next to impossible. Rates are going up and arguably have been far too low for far too long.

In the past month, rates on a 30-yr fixed mortgage at no points have soared from 6% to 6.75%. When rates rise, affordability falls. Every .25% increase in mortgage rates takes away approximately 2.5% in purchasing power. Therefore, roughly 7.5% of purchasing power has evaporated in the past month. This, of course, varies from individual to individual, but assumes a household with a steady income buying at the maximum allowable debt-to-income ratios, which is typical.

People are focusing so much on the loss of loan programs and tightening of guidelines and have completely forgotten about one of the most basic of housing affordability factors, mortgage rates. This is, unless they plan to pay cash.

If rates climb back to levels last seen in 2000 and 2001 (7.5% to 8.5%), an additional 7.5%-12.5% purchasing power could evaporate. In the past, mortgage rates were a leading indicator for home prices and the health of the housing market in general. Now, that the days of free money and ‘heartbeat loans’ are over, ‘old-school’ factors like employment, income levels, interest rates, consumer sentiment and the health of the broader economy will have a significant influence once again.

Average 30-yr Rates at No Points

Today’s Rate 6.750%
YTD 2008 6.375%
2007 6.750%
2006 6.750%
2005 6.250%
2004 6.250%
2003 6.250%
2002 7.000%

[Huckleberry]

Excerpt from a Mr. Mortgage newsletter.

Now bond yields and mortgage rates are soaring, which is an affordability wild-card housing prices can’t handle. Most analysts and economists make their housing predictions based upon an average 30-year fixed rate over many years or the present rates, both of which are historically low and have been since 2003 (see chart below). Turning around this trade, with inflation levels that make owning Treasuries a money-losing proposition and rate overseas leading the way, maybe next to impossible. Rates are going up and arguably have been far too low for far too long.

In the past month, rates on a 30-yr fixed mortgage at no points have soared from 6% to 6.75%. When rates rise, affordability falls. Every .25% increase in mortgage rates takes away approximately 2.5% in purchasing power. Therefore, roughly 7.5% of purchasing power has evaporated in the past month. This, of course, varies from individual to individual, but assumes a household with a steady income buying at the maximum allowable debt-to-income ratios, which is typical.

People are focusing so much on the loss of loan programs and tightening of guidelines and have completely forgotten about one of the most basic of housing affordability factors, mortgage rates. This is, unless they plan to pay cash.

If rates climb back to levels last seen in 2000 and 2001 (7.5% to 8.5%), an additional 7.5%-12.5% purchasing power could evaporate. In the past, mortgage rates were a leading indicator for home prices and the health of the housing market in general. Now, that the days of free money and ‘heartbeat loans’ are over, ‘old-school’ factors like employment, income levels, interest rates, consumer sentiment and the health of the broader economy will have a significant influence once again.

Average 30-yr Rates at No Points

Today’s Rate 6.750%
YTD 2008 6.375%
2007 6.750%
2006 6.750%
2005 6.250%
2004 6.250%
2003 6.250%
2002 7.000%

[Author]

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