A 4-8% discount multiplied by 5:1 (or 33:1 leverage) is ENORMOUS. It dwarfs an extra 5-10% monthly expense for a year or two or three.
Especially considering R/E capital gains are mostly tax free.
This is what everyone said after the financial crisis. 3 years after rates moved up from 0% (~2018) - the 30-year mortgage rate hit an all-time low (~2021).
I'm not sure how you can be so confident they're never going lower this time. And I'm completely lost how you can be confident they won't be lower than they are now within a couple of years...
In every country in advanced world??
Nonetheless, I’ll take the lower principal of a lower priced house than an over-priced house with a lower interest rate … lower taxes and possibility to refinance at lower rates.
In Canada, if you refinance before your mortgage term end it's typically to pay 3 months of interest as penalty or the difference between your new rate and the old rate until the term ends.
It's pretty damn punitive.
They only exist in the US and Denmark: https://www.thediff.co/p/the-30-year-mortgage-is-an-intrinsi...
And they only exist because of A LOT of government intervention.
If interest rates don't continue to only go down - I imagine you'll see them disappear in the US and Denmark.
US & EU banks mostly make their mortgage profits from constantly refinancing at ever lower rates.
But banks don’t profit off the interest rate on mortgages. It’s mostly origination fees. Mortgages are sold off immediately. They don’t hold onto them.