Low Interest / High Price versus High Interest / Low Price...

[Anonymous]

With the housing market the way it is, it seems housing prices are still falling.  I know it's futile to try to time the bottom, but I've been waiting for a long while to purchase a property.  Seems we're at a point where mortgage rates are on their way back up too.

My question is, which would you prefer... to purchase a property at a higher price, but at a lower interest rate, or spend more on interest for a property that is priced lower.

The obvious answer to me would be to pay a lower price and hope to refinance later at a lower rate when it becomes available, but I want to gather some input from others.

[nurseratchett]

I would- and am- doing exactly that. Interest is high, but prices are low, and inventory is hi. Plus, since I took a second job this year to help finance buying a home, if I don't buy and get the tax deduction this year, I'm in a lot of trouble next April...

[Donna1966]

I'm with ya, I'd rather buy low. You can refinance later if interest drops, you can never get out from under the price of the house and it will take longer to build equity.

With that said, I would never pay anything above my means currently just to get a house at a low price, even if I "think" that I could refinance later.

[ShanetheMortgageMan]

You can never change the price of the home you paid after you've purchased it, but you could always try to refinance and change your rate after you've purchased.  Price is more important that low interest rates IMO.

[Anonymous]

It depends upon your situation.  Do you need to move?  What is the market where you are at.  ETC.  While lower price is more important, rates are very unsteady right now and with some of the inflationary problems we are likely to have in the future given current fiscal policies, I would be surprised to see rates get much lower than they are right now (i think they will go up and we may see 7.5-8% or so interest rates by next year as we are already seeing some 6.75 and 7% loans)  In alot of markets, although maybe not at the bottom, houses will not probably drop that much more unless there is another financial crisis.  In other areas, house may still drop 10-15%+ so it is more about knowing your market and thinking about what is overall best for you. 

[marty56]

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@ShanetheMortgageMan wrote:
You can never change the price of the home you paid after you've purchased it, but you could always try to refinance and change your rate after you've purchased.  Price is more important that low interest rates IMO.

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Well said.  Also you can pay it off quicker by putting extra money when you have it into the principle.