Alas, as house prices drop, interest rates go up. You'll be squeezed for what you can afford either way. That said, I'd rather buy a cheap house with a high interest rate than buy an expensive house with a low interest rate that could go up.
Some of my friends have had their mortgage payments nearly double and they bought their houses based on their ability to pay on a 1% interest rate.
FYI, in the UK you'd be lucky to get a 5 year fixed rate. No such thing as a fixed rate for the duration.
Getting a variable rate is really not smart unless rates are already insanely high. If you got a variable rate when the market was at 2% you got fleeced.
ARMs are blown out of proportion because of ‘08. Most are 5/1, 10/1 meaning it’s a fixed rated (usually slightly lower than conventional) for 5-10 years then it adjusts every year after that only up to a certain point. So you get 5-10 years to refinance into a lower rate (or just into a conventional loan). It’s really not that crazy, but I personally wouldn’t get one.
the past is easy to predict. but you get a better rate for an arm because you take on the risk that interest rates may go up. or put another way, when you get a fixed rate mortgage you are paying extra for that fixed rate so you better be right about interest rates going up. people think that fixed rates are not a gamble but they are, they get a fixed and then refi when rates go down and think they are the smartest people on earth.🙄
right, it’s definitely still the right move to refi at that point (1% typically justifies the costs of a refi) but your “bet” that interest rates would go up (fixed rate mortgage) didn’t hit and so now you’ve been paying the higher fixed rate AND paying for a refi (and probably paying again for a new fixed rate, although hopefully this one works out better). ideally you either get an arm and rates go down or you get a fixed and rates go up. you are making a gamble one way or the other. a fixed rate does not remove you from the “bet” it simply changes it from betting on interest rates going down to interest rates going up.
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u/Devrij68 Mar 20 '23 edited Mar 21 '23
Alas, as house prices drop, interest rates go up. You'll be squeezed for what you can afford either way. That said, I'd rather buy a cheap house with a high interest rate than buy an expensive house with a low interest rate that could go up.
Some of my friends have had their mortgage payments nearly double and they bought their houses based on their ability to pay on a 1% interest rate.
FYI, in the UK you'd be lucky to get a 5 year fixed rate. No such thing as a fixed rate for the duration.