Is a Low Price or Low Interest Rate Better?


Right now, buyers have the best of both worlds – home prices are beginning to slow down for the season and mortgage interest rates are near record lows. So should you wait for prices to go lower or take advantage of low interest rates right now?

The price of a home is fixed, so home prices have to drop significantly to beat a minor fluctuation in mortgage interest rates. Here are some numbers to consider:

  • If you buy a home at $400,000 with 10 Percent down ($360,000) and a 30-year, fixed-rate mortgage at 3.5%, your monthly payment will be $1,617. If you keep the mortgage for the entire term, you’ll pay $221,962 in interest.
  • The same home at 4% interest costs $1,719, a difference of $102 more per month and $258,730 in interest over the life of the loan. The difference in interest payments alone is $36,768.
  • If you’re able to buy the home you want for five percent less ($380,000 less 10 percent down) and 3.5% interest, your payment would be $1,536, $81 less per month than in example one.
  • You’re able to buy the home for $380,000, but in the meanwhile, mortgage rates go to 5%. Your monthly payment is $1,633, $97 more per month than if you’d purchased at 3.5 percent.

Clearly, higher interest rates cost you more monthly, but getting a better deal on a home is nearly just as good. Take advantage of slowing prices and low interest rates while they’re both available. Happy home hunting!

For more home tips, follow us on Facebook. Looking for a new home in the Kansas City area? Visit us at!

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s