Do Interest Rates Really Matter?

Do Interest Rates Really Matter?

Let's ask this another way, a more personal way,....

Should I buy now, before interest rates go up?

Okay, here's my first caveat: while I DID pass the Mortgage Broker Exam for the state of Texas on the first try, I DO NOT PRACTICE mortgage lending. (Now the mortgage brokers can get mad at me with a reason.)

The scary, uncomfortable answer to your question is, ultimately, 'No, you should not!'

'Say what!?' you ask in strident disbelief.

Put your tar and feathers away. Then I'll explain.

The average loan lasts less than 10 years, 7 is more likely. Then the house is sold, refinanced for a usually smaller amount, or equity is taken out, depending upon the state laws, and so on. So what, exactly does that mean?

Naked Truth Number Two coming...(see my other posts to find out what number one is):

Your Interest rate doesn't matter!

In the 70's people were buying all the home they could get for 18% interest! In the mid 90's, they were buying all the home they could get at 6.5-8.5%! And in 2010 and beyond, GUESS WHAT?

People are still doing what they have always done. And you will too, and so will I.

If rates ever fall to zero, we'll all refinance again. Don't get fooled into a 'hurry up and buy' scenario over some alleged 'The rates are rising!' flood scare. This is NOT a reason to buy a house ever.



Here's the question behind your question, and it's what you should really be answering? How much house payment should I really be shackling myself to? For how long?

I like Dave Ramsey's guidelines. I have answered that question in another post.

Thanks for reading the Dr. Phil of Real Estate!

Comments are welcome, by the way.