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Updated about 8 years ago,

User Stats

35
Posts
17
Votes
Jason Noah Choi
Pro Member
  • Jersey City, NJ
17
Votes |
35
Posts

How do interest rates affect property values?

Jason Noah Choi
Pro Member
  • Jersey City, NJ
Posted

There's a great article on Investopedia that explains how interest rates affect property value which I've found to be generally helpful. I'm curious to hear about seasoned investors' experiences. I know lately, interest rates have generally been going down.

For example, are FHA loan borrowers probably going to be "underwater?" Case in point this scenario:

John buys a duplex using an FHA loan at 3.5% at 3.5% interest down for $100,000 in November 2016. In December, the feds raise the rates to 4.5%. In one year, John had been planning to refinance out of the FHA into a conventional loan in order to get out of PMI. It seems; however, if rates go up, and home values generally go down, a refinance can potentially not happen for quite some time. Am I correct in my understanding of this situation?

Any experiences or shares would be very helpful in our continuous planning to correctly buy.

  • Jason Noah Choi