What happens if prices drop ⬇️ and interest rates ⬆️increase??

Dated: 12/10/2018

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"Patrick, it seems interest rates will continue to increase. Doesn't this mean that house prices have no other option but to go down since most Buyers won't be able to afford to qualify for a mortgage at the higher rates?" You can't argue with that logic as low-interest rates have made high-cost real estate "relatively" affordable. For us to determine if waiting for a potential price drop makes sense we have to dig deeper. We can't take a price drop at face value.

We have to calculate the cost to carry the interest rate on a lower priced property.

Here is the potential scenario we will call

Scenario A: 

  • House price - $500,000 
  • Interest rate - 2.99% 
  • Amortization period - 25 years 
  • Payment Frequency - Monthly 


Mortgage monthly payment = $2,363.66
Mortgage balance at the end of 5 years = $427,291.07 

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