{"id":9608,"date":"2019-09-24T12:16:40","date_gmt":"2019-09-24T12:16:40","guid":{"rendered":"https:\/\/kenyahomes.co.ke\/blog\/?p=9608"},"modified":"2019-10-04T10:14:21","modified_gmt":"2019-10-04T10:14:21","slug":"is-housing-prices-or-interest-rate-more-important","status":"publish","type":"post","link":"https:\/\/kenyahomes.co.ke\/blog\/is-housing-prices-or-interest-rate-more-important\/","title":{"rendered":"Is House Price or Interest Rate More Important?"},"content":{"rendered":"\n<p>Two housing-market shifts encourage potential homebuyers to call real estate agents. The first is a drop in housing prices and the second is low&nbsp;mortgage&nbsp;rates. Deciding which factor is more important can make a difference in several areas, the most important may be in your wallet.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"mntl-sc-block_1-0-2\"><strong>Impact on Monthly Payment<\/strong><\/h4>\n\n\n\n<p>Suppose you started the home search process when interest rates were hypothetically <em>6%<\/em>. You saw a one-bedroom luxury apartment for sale for <em>kes 10,000,000<\/em>. You calculated your 30-year monthly mortgage payment on <em>kes 8,000,000<\/em> \u2013 the amount you would be mortgaging after a <em>20%<\/em> down payment and your closing costs. Your monthly payment would be <em>kes 48,000.<\/em><\/p>\n\n\n\n<p>You decide you don\u2019t like this payment and rate, so you wait six months and the interest rate drops to <em>4%<\/em>. However, an apartment in the neighbourhood you want now costs <em>kes 12,000,000<\/em>. You put down <em>20%<\/em> plus closing costs, and you are left with a mortgage of <em>kes 9,600,000<\/em>. Your monthly payment on a 30-year mortgage is <em>kes 45,800<\/em>. Your payment dropped by <em>kes 2,200<\/em>.<\/p>\n\n\n\n<p>But does a payment drop financially make up for the higher down payment? Factoring in that your down payment was <em>kes 400,000<\/em> more, you still save about<em> kes 1,000<\/em> to <em>kes 1,100<\/em> per month \u2013 around <em>kes 392,000<\/em> over the course of 30 years.<\/p>\n\n\n\n<p>If real estate prices had not risen in your prospective neighbourhood from the <em>kes 10,000,000<\/em> price point with which you started and you had snagged a <em>4%<\/em> interest rate, your monthly mortgage payment would have been <em>kes 38,200<\/em>. You can use Kenya Homes&#8217; <a href=\"https:\/\/www.kenyahomes.co.ke\/buy\/\"><strong>mortgage calculator<\/strong><\/a>&nbsp;to see what your payments would be.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"mntl-sc-block_1-0-11\"><strong>Impact on Down Payments<\/strong><\/h4>\n\n\n\n<p>In the example of the apartment that rose from <em>kes 10,000,000<\/em> to <em>kes 12,000,000<\/em>, your monthly payment dropped because of a lower interest rate. But would the lower payment help you if you didn\u2019t have an extra <em>kes 400,000<\/em> for a larger down payment? <\/p>\n\n\n\n<p>The difference in the down payment could eliminate the possibility of buying the home you want or knocking you out of the buyer\u2019s market altogether if you can\u2019t find a cheaper neighbourhood. Also, losing that extra <em>kes 400,000<\/em> will affect your ability to pay for unexpected home repairs, lower the amount of your emergency savings and diminish your ability to afford to furnish your new home.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"mntl-sc-block_1-0-14\"><strong>Coexistent Low Rates and Low Prices<\/strong><\/h4>\n\n\n\n<p>How do you know what a low rate is? For example, in 2016 interest rates and housing prices were both rather low when compared to the previous and following three to five years. Look at the last five years for highs and lows compared to the current&nbsp;situation.&nbsp;<\/p>\n\n\n\n<p>There\u2019s no assurance that history will repeat itself and create other low prices\/low rates housing market. According to property market analysts in a 2018 Cytonn report, Kenyan house prices were to rise at double the pace of inflation and wages this year.&nbsp;The supply of single-family homes is falling short of rising demand, making housing less affordable. If you need a house soon, the option to wait for an ideal housing market circumstances may not be realistic.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"mntl-sc-block_1-0-19\"><strong>Impacts on Movability<\/strong><\/h4>\n\n\n\n<p><a href=\"https:\/\/kenyahomes.co.ke\/blog\/how-to-get-the-best-mortgage-interest-rate-you-possibly-can\/\">Interest rates <\/a>don\u2019t matter as much if you can easily afford your payments and live in your home for five years or less. While it\u2019s never a guarantee that housing prices won\u2019t drop further, you can view estimated housing prices for the last 10 years by selecting an address in the neighbourhood you are studying online.<\/p>\n\n\n\n<p>Always compare neighbourhood values instead of national or city by city. Home price patterns vary greatly from neighbourhood to neighbourhood and state to state. The likelihood that you will owe more than your home is worth (known as being underwater) will be less if you buy a home when your local real estate market is below its peak.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"mntl-sc-block_1-0-31\"><strong>Refinancing<\/strong><\/h3>\n\n\n\n<p>An advantage of buying at&nbsp;a lower home price compared to having&nbsp;a lower interest rate is that your home can be refinanced or modified in the future. If interest rates decrease, you can lower your costs. Basically, the problem with high initial interest rates can be mitigated in the future if rates decrease.<\/p>\n\n\n\n<p>If your current home\u2019s interest rate is significantly higher than current rates, ask potential mortgage bankers how much it would cost to modify your loan. The range can be anywhere from free to thousands. There\u2019s no guarantee that home loan interest rates will drop, but you can make sure that you can afford to refinance if they do.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"mntl-sc-block_1-0-36\">The Bottom Line<\/h3>\n\n\n\n<p>The decision to buy a home should always be based mostly on your ability to afford the monthly payment, down payment, home repairs, and furnishings, while having enough left for an emergency fund. Always consider factors such as closing fees and the option to pay down your mortgage if you must move quickly.<\/p>\n\n\n\n<p>Ideally, buy when both interest rates and home prices are low. If that\u2019s not possible, calculate both short- and long-term costs of a lower interest rate versus a lower purchase price. When the numbers make the most sense, make your move.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Two housing-market shifts encourage potential homebuyers to call real estate agents. The first is a drop in housing prices and the second is low&nbsp;mortgage&nbsp;rates. Deciding which factor is more important can make a difference in several areas, the most important may be in your wallet. Impact on Monthly Payment Suppose you started the home search [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":9611,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"amp_status":"","footnotes":""},"categories":[23],"tags":[],"class_list":{"0":"post-9608","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-real-estate"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v22.7 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Is House Price or Interest Rate More Important? - Kenya Homes<\/title>\n<meta name=\"description\" content=\"While it\u2019s never a guarantee that housing prices won\u2019t drop further, you can view estimated housing prices for the last 10 years\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/kenyahomes.co.ke\/blog\/is-housing-prices-or-interest-rate-more-important\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Is House Price or Interest Rate More Important? 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