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What your analysis doesn't take into account is that if interest rates go up, demand plummets and the 1 million dollar home at 3.5% is worth 600k at 10% interes
by conanbatt 7y ago
What your analysis doesn't take into account is that if interest rates go up, demand plummets and the 1 million dollar home at 3.5% is worth 600k at 10% interest rate.
A big RE mogul used to say "Its better to buy a cheap house with expensive credit than an expensive house with cheap credit. You can refinance the latter"
- ipython 7y agoI assume you meant to say “you can refinance the former”?
- conanbatt 7y agoYes, sorry.
- imtringued 7y agoWhen you have a $300k loan and refinance midway from high to low or low to high interest you will pay the same amount of interest in the end. The reason why low interest rates are bad is because everyone is bidding prices up. Paying $1000k at low interest for the same house is fundamentally worse than paying $300k at high interest.
- shados 7y agoSure, but in the markets people bitch about that hasn't happened. Even during the crash, prices didn't move downward that much. There is a risk for sure, but that's true of all investments that pay better than t-bills.
- conanbatt 7y agoDuring the crash, properties went down 50% and more. It was a hell of a time to buy.
- deleted 7y ago[deleted]