Did you buy a house because of low interest rate?

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acegolfer
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Did you buy a house because of low interest rate?

Post by acegolfer »

I never bought a house because the mortgage rate was low. It was an insignificant factor because I consider these 2 questions separately.

1. Whether to buy or rent, which house to buy is an investment decision (what to buy).
2. Whether to use a mortgage or which mortgage to use is a financing decision (where to borrow).

"investment decision" and "financing decision" are the terminology in the corporate finance textbook. To me, the first is really a consumption decision. I bought it because of my family. And that's why I could viewed these 2 questions separately. To others, these 2 questions can be related through borrowing cost. So I would like to ask others.

Q: Did you buy a house because of low interest rate?
Last edited by acegolfer on Mon Mar 16, 2015 3:12 pm, edited 1 time in total.
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Riprap
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Re: Did you buy a house because of low interest rate?

Post by Riprap »

acegolfer wrote:Q: Did you buy a house because of low interest rate?
No.
KlangFool
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Re: Did you buy a house because of low interest rate?

Post by KlangFool »

acegolfer wrote:I never bought a house because the mortgage rate was low. It was an insignificant factor because I consider these 2 questions separately.

1. Whether to buy or rent is an investment decision (what to buy).
2. Whether to use a mortgage or which mortgage to use is a financing decision (where to borrow).

"investment decision" and "financing decision" are the terminology in the corporate finance textbook. To me, the first is really a consumption decision. I bought it because of my family. And that's why I could viewed these 2 questions separately. To others, these 2 questions can be related through borrowing cost. So I would like to ask others.

Q: Did you buy a house because of low interest rate?
acegolfer,

Yes. After running through the calculation. it was cheaper to buy versus renting in order to live in this particular school district. I do not consider the house that I lived in as an investment. It is purely as an expense.

KlangFool
veekay
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Re: Did you buy a house because of low interest rate?

Post by veekay »

Same. Cheaper to buy vs rent. Took out a 30 year loan, so no risk that my payment will go up.
surfstar
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Re: Did you buy a house because of low interest rate?

Post by surfstar »

No.

Even with a 0% interest rate, houses are too expensive here.
Carefreeap
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Re: Did you buy a house because of low interest rate?

Post by Carefreeap »

We've preferred to own.

And our relatively recent experience renting for three years while we lived in Germany reinforces that preference. Landlord was difficult. I couldn't use my front door for nearly six months because the stairs leading up to the front door were under construction. Totally unnecessary over done repair. Then he tried to cheat us out of Eu 500 of our deposit. What a jerk.
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Gropes & Ray
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Re: Did you buy a house because of low interest rate?

Post by Gropes & Ray »

Yes. I bought my house a few years earlier than anticipated because rates were so low it was a reasonable gamble to pay PMI. Also, my property taxes, pmi, interest payments and increased insurance premium are together just about the same as rent on a much smaller house in a much less desirable neighborhood. But, if I did not plan to live in this house for 30ish years, I would not have bought it when I did.
Stonebr
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Re: Did you buy a house because of low interest rate?

Post by Stonebr »

I bought my first home because there was a recession and Boston condominiums were being given away. Interest rates were over 12%, but it was still cheaper than renting when all the costs and credits were included -- interest, utilities, property tax, condo fees, tax deductions.

I analyzed it like an investment. I figured that if I lived there for 8 years and my equity went to zero, I'd still be better off than renting. What actually happened was way better. So, yes, it was an investment and I always viewed it that way. I had an advantage over other landlords in that I had the best tenant possible -- me.

High interest rates mean low prices. Low interest rates mean high prices. That's how it should work -- just like bonds.
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itstoomuch
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Re: Did you buy a house because of low interest rate?

Post by itstoomuch »

no.
It was time.
Wife was looking for a suitable nest.
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo
J295
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Re: Did you buy a house because of low interest rate?

Post by J295 »

Needed more space in 1992.
12% loan was good then.
Built the house.
Paid off the loan in 10-15 years.
Kids gone and too much house so we moved a year ago.
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Uncle Pennybags
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Re: Did you buy a house because of low interest rate?

Post by Uncle Pennybags »

acegolfer wrote:Q: Did you buy a house because of low interest rate?
When I bought my house I camped out on a sidewalk in front of a bank for two nights to get a special 14% government scheme mortgage for the great unwashed. Regular mortgages were 18%. Those were the days.
leod
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Re: Did you buy a house because of low interest rate?

Post by leod »

Bought a house due to increasing rent and ran the Rent vs Buy calculator, says ill be better buying in 5yrs.
Privacy and School are the other decisions to move.
peppers
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Re: Did you buy a house because of low interest rate?

Post by peppers »

We bought our house 32 years ago. The mortgage was a 30 year fixed @ 12.25 and the first born male child.
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HongKonger
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Re: Did you buy a house because of low interest rate?

Post by HongKonger »

Yes. Bought a shoebox in Hong Kong when the interest rate was 0.85%. Sold after 2ish years when the price had nearly doubled.
likegarden
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Re: Did you buy a house because of low interest rate?

Post by likegarden »

No, interest rates were high (8%?) in 1974. We tried to have a baby and needed a house to live in. We wanted to live in a house with own landscape around it somewhere in the suburbs. I lived all my life in apartments and needed that change.
Last edited by likegarden on Tue Mar 17, 2015 4:06 pm, edited 1 time in total.
dsmil
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Re: Did you buy a house because of low interest rate?

Post by dsmil »

We didn't buy our house because of interest rates, but I do believe that we bought our house a year or two earlier because of interest rates. In the fall of 2012, we went against the Boglehead philosophy and went with an FHA loan with 3.5% down. We were able to catch low prices and interest rates, so it has worked well for us. If interest rates had been higher at the time, our purchasing power would have been less and we would have waited to save more in order to get into the type of house that we wanted.
JimmyD
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Re: Did you buy a house because of low interest rate?

Post by JimmyD »

dsmil wrote:We didn't buy our house because of interest rates, but I do believe that we bought our house a year or two earlier because of interest rates. In the fall of 2012, we went against the Boglehead philosophy and went with an FHA loan with 3.5% down. We were able to catch low prices and interest rates, so it has worked well for us. If interest rates had been higher at the time, our purchasing power would have been less and we would have waited to save more in order to get into the type of house that we wanted.
Almost my story, verbatim. Just over two years ago, my then fiancee and I were a couple months away from being married and living together in my 800 ft condo which was quickly closing in on us. By some miracle, my name finally came up on our HOA's rental list and I was able to secure an incredible tenant with a 2-year lease. During that time, we stumbled upon a brand new neighborhood in a fantastic school district that had just a couple houses left for sale. We fell in love with one and the rest is history. Although we did an FHA loan as well, it's a 30-year fixed at 3.3% (which I felt was simply too good to pass up), so it's hard to complain. If I had to, my biggest gripe would be the $273 mortgage insurance premium that we pay every month for the next few years.

On the upside, we've already seen our equity skyrocket as similar homes have resold since we've moved in for a substantial amount more than what we paid for ours.
basspond
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Re: Did you buy a house because of low interest rate?

Post by basspond »

Indirectly, yes. Went to refinance but realized the payback of the refinance made us be in the house longer than we would have liked.
bigred77
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Re: Did you buy a house because of low interest rate?

Post by bigred77 »

I upgraded earlier then I would have and bought much more house than I would have due to low interest rates.

It worked out well for me. I understand this was not a risk free decision.

I have no problem borrowing (to buy assets) when interest rates are low and I have no problem lending when interest rates are higher (all relative the ranges we've seen in the past of course).
IlliniDave
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Re: Did you buy a house because of low interest rate?

Post by IlliniDave »

No, I bought one because I needed a place to live and believed at the time that owning a home was the best option for me. I bought less than I could "afford", so interest rate wasn't a big factor. This was in the 1990s and I remember the interest rate was something close to 6.875% At the time people were pleased when they could get a rate between 6.5% and 7%.
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kenyan
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Re: Did you buy a house because of low interest rate?

Post by kenyan »

Certainly not. I bought a house because (a) our family and job situations were stable enough to be relatively certain that we could stay put for 5+ years; (b) we had the down payment saved up, and (c) analysis of all-in costs of renting versus buying given those conditions became favorable.

Honestly, I wanted interest rates to increase to help drive prices down, since property taxes (and some other costs) are tied to the assessed value, property tax increases are capped per year in CA where I live, the effect of extra principal payments is more acute with lower prices/higher interest rates, and having higher initial interest rates allows for a huge potential benefit down the road in refinancing to a lower rate. Alas, none of that occurred, and I purchased a high-priced house with a low-interest-rate mortgage. Interest rate declines benefit current house owners and sellers, not house buyers (at least in areas where prices/payments constrain house buyers).
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itstoomuch
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Re: Did you buy a house because of low interest rate?

Post by itstoomuch »

Apparently, Low interest is confounding The Fed, Bankers, RealEstate Agents, and Builders alike. Apparently Americans have come to understand that homes are liabilities and not investments. :confused

DS (29) bought a house in 2014, on a 7 yr ARM @2.675. If he had enough moolla, he could have also could set up a Liability Matching Portfolio--TLT is today yielding 2.60%. The Stars was aligned for him to purchase a home.

When DS was in school 2002-2006, His EE Bonds was yielding more than the student loans' interest and stock market gains were multiples of loan interest. :idea:
:oops:
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Cosmo
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Re: Did you buy a house because of low interest rate?

Post by Cosmo »

acegolfer wrote: Q: Did you buy a house because of low interest rate?
No. I purchased a home because I needed a place for my family to live.
Cosmo
Dulocracy
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Re: Did you buy a house because of low interest rate?

Post by Dulocracy »

No. I did refinance because of a low interest rate, however. Interest rates going down certainly made the house more affordable when I refinanced, but even at 6.5% interest, I was doing better off owning than renting after running calculations including insurance, taxes, maintenance and repairs, etc.
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Sportswhiz00
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Re: Did you buy a house because of low interest rate?

Post by Sportswhiz00 »

I didn't buy a house because of low interest rates, but I did buy a house sooner than I otherwise would have because of low interest rates. In fact, I did it twice, and both times rates ended up being lower a year later. It wasn't all bad because I was able to refinance at a lower rate one of the two times.
PS241
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Re: Did you buy a house because of low interest rate?

Post by PS241 »

Yes. Family encouraged us to buy earlier than we were planning due to low interest rate.

We said ok, we will start looking and ended up finding a house we liked.

Bought with nothing down :oops: in early 2013. Actually we rolled closing costs into the loan.

We've since refinanced and will be hitting 20% early 2016. I have a hard time paying a lot extra since my checking account has .2% higher interest than the mortgage.
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