Re: Excellent Point on paying more attention to rates - Saab General Bulletin Board - Saabnet.com
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Re: Excellent Point on paying more attention to rates
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Posted by Tim (more from Tim) on Wed, 30 Mar 2011 20:10:41 Share Post by Email
In Reply to: Re: Excellent Point on paying more attention to rates, 11madness, Wed, 30 Mar 2011 19:05:00
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It takes some jogging of the mind to recall what life was like in a rising interest environment . . . back in the 1970's. When rates rise from current sub-5% to the historical average of about 8%, the same payment that can afford a $500k house now will only be able to afford a $300k price. How many people have that $200k lying around to hand over to the bank at sale closing? Instead, they will quickly realize that they can rent the house out at about the same amount they have to pay for mortgage and tax+insurance, effectively passing the low interest rate on the existing loan to the renter without triggering a sale / loan-payable event, and in places where there are property tax caps also avoiding triggering a tax rise. By the mid to late 1970's, "assumable" loans became all the rage, as the banks were able to charge another couple points of interest up-front to let the borrower pass the loan to the next guy without having to be the landlord in the event of the condition changes that you mentioned.

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