Don't see too many people comment on the accelerated equity one builds when buying with a low interest rate mortgage. @3% you've amortized down to 89% at five years and 76% at ten years compared to 93% & 84%
with the 6% loan of a few years ago. Low interest rates really accelerate principal paydown even without optional prepayments.

That could also read as the "accelerated loss of tax deduction" that you had used to justify a higher price.

That tax deduction is false, based on higher monthly payments. Per $100,000 borrowed the 3% payment is 421.60 after vs $600 @ 6%. The tax deduction does not make up for owing a higher payment to begin with.

The slightly accelerated equity accrual pails in comparison to the principal risk should rates return to normal levels.

Over 30 years per $100k one is making an extra over $64,000 in mortgage payments some of which may not be fully deductible. That is certain and more than compensates for the potential of principal risk and is additionally compensated for by paying back the mortgage in inflation adjusted dollars.

It is definitely not "certain". Very few mortgages last 30 years.

Macro-economically we are in a liquidity trap. There is significant deflationary risk and purchasing a depreciating asset with borrowed money will end poorly in all cases, no matter the amortization schedule.

usq, Couple of points. When we talk deflation we're speaking of a contraction of credit. The price level is not falling.

"When we talk deflation we're speaking of a contraction of credit. The price level is not falling."

The Spanish and Las Vegas real estate markets will be relieved to hear this. Nothing a shot of liquidity can't fix, eh?

Sprint back in the 4's

Hold on a minute, Riversider. *High* interest rates mean *low* selling prices, which means -- assuming you plan to pay down your mortgage aggressively every month -- you'll get done a lot faster than if you were paying off a larger loan.

W67: "like crying over the condom bill" Awesome.

> accelerated equity one builds when buying with a low interest rate mortgage

Doesn't come close to making up for the lack of equity building when you overpay. You could have 0% interest, and not build equity.

"Building equity" has been so misused, it is nearing old wives tale status...

makes way too much sense