If you have ever financed real estate before, you understand that the interest rate plays a huge role in how much you will end up paying in total.
Quicken Loans explains the interest rate will also impact the price of the property you can afford. The effect of the interest rate is something you cannot afford to ignore.
Home price vs. interest
Your first concern when buying a property will be the cost of the property and the interest rates. Ideally, you want low prices and low interest, but that typically does not happen. You will either have low prices and high interest or high prices and low interest. You may wonder which is best.
With a low price and high interest, you save more upfront because you can put up less of a down payment. There is also the option to refinance later to grab a lower interest rate, which can create a win-win situation for you.
With a high price and low interest rate, you save more in the long-term. More of your money goes to paying the loan than paying interest. You also do not have to bank on interest rates dropping and can lock in at the low rate.
Monthly payments and interest rates
The interest rate will figure into your monthly payment. It determines how much of your payment will go towards paying down the actual amount you borrowed. Interest portions of your payment do nothing to help pay down the principal balance.
You have complete control over making the final decision of what interest rate you will buy at, but do keep in mind that you should always consider the interest rate when making your buying decision.
