Should I buy this house with high interest rate or wait?

New / Eng Tc270Nw150
May 15 41 Comments

I found this lovely house in Castro Valley. My offer of 1 million got accepted and I'm in the inspection period. I can only put %10 down and the lender could get me 900k loan with %4.25 7 year ARM. That was the best I could get, boa and wells fargo only offered 700k loan with slightly better rate.

My partner and I have good stable jobs with total liquid TC of 450k this year. (It was 150k last year, that's why we don't have much cash or assets.) We live in a shitty rental apartment with $2500/mo and our living condition is not good. We really want to move to our own house and improve quality of life as it's getting depressing. We can save about 150k in the upcoming year. My lender says we can put down this money and refinance next year with the cost of $1500.

Should we buy the place now with high rate, or wait and buy next year? There's also no guarantee that rates don't go up next year.

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TOP 41 Comments
  • New / Other
    DuQvV7y

    New Other

    BIO
    Did stuff. Hustled hard. Retired
    DuQvV7ymore
    You should look at a 30 year bank rate charge before terming 4.25% high.

    2% rates were the product of housing meltdown. Historically rates were in the 6-8% range.

    In the 90s, the norm was 8-12% which was lower than the 11-14% of the decade before.
    May 15 6
    • New / Other
      DuQvV7y

      New Other

      BIO
      Did stuff. Hustled hard. Retired
      DuQvV7ymore
      3.75 vs. 4.25% is a .5% difference.

      Youโ€™re putting 10% down so youโ€™re getting a higher rate compared to 20% or 30% down (greater risk)

      Many people buy down points.

      You should probably spend some time studying how banking rates work before commuting to a $1m loan.

      Cheers.
      May 15
    • New / Eng Tc270Nw150
      OP
      I understand that you get higher rate if you put %10, and those %3.75 are for %20 down. My point is that it *may* make sense to wait 1 year and save money for downpayment to be able to get %0.5 lower.
      May 15
    • New / Other
      DuQvV7y

      New Other

      BIO
      Did stuff. Hustled hard. Retired
      DuQvV7ymore
      Many people here are clairvoyant and can predict with great certainty the imminency of recessions.

      I donโ€™t have that skill.

      I chimed in to correct 2 things:
      1. 4.25% is not high
      2. Rates drop in a recession

      My work here is done.
      May 15
    • New / Eng Tc270Nw150
      OP
      Thanks!
      May 15
    • Cadence / Product
      luna.

      Cadence Product

      BIO
      .
      luna.more
      You can always refinance if there is no lock down or other toxic parts in the loan... dont get stuck on the rate
      May 15
  • Microsoft EMoC46
    Do you love the house? It sounds like you really want to be homeowners. Go for it. Don't suffer another year.
    May 15 1
    • New / Eng Tc270Nw150
      OP
      Yes I love it and it's in between our jobs. Commute gets so much better for one of us.
      May 15
  • Microsoft / Product
    Brazuka

    Microsoft Product

    PRE
    Bain & Company
    Brazukamore
    7 year duration is the most concerning. The monthly mortgage will be crazy high and if one of you lose the job you'll be in trouble, especially since you mentioned you don't have a lot of assets.
    May 15 4
    • New / Eng Tc270Nw150
      OP
      We won't lose jobs. High performing in pre-ipo and public tech giant. Why 7 year is most concerning?
      May 15
    • Microsoft / Product
      Brazuka

      Microsoft Product

      PRE
      Bain & Company
      Brazukamore
      I already said why
      May 15
    • Vistaprint / Eng
      vp.dev

      Vistaprint Eng

      PRE
      Cimpress
      vp.devmore
      I don't think the loan is for 7 years. A 7/1 ARM means there rate is fixed for the first 7 years. And even after the 7 years there are limits on how much the rate can increase each year. I don't get what's concerning either.
      May 15
    • New / Eng Tc270Nw150
      OP
      Yes 7 arm does not mean it needs to be paid off in 7 years. Imagine that!
      May 15
  • SAP mDmE28
    Are you sure that a house in Castro Valley worth 1M? Do not forget Alameda County is the worst in the Bay
    May 15 5
    • New / Eng Tc270Nw150
      OP
      The school rating is very good there. The nearby houses were sold similarly
      May 15
    • New / Eng Tc270Nw150
      OP
      I'm not sure though, this is the comp that my agent sent. Might have been cherrypicked.
      May 15
    • New / Eng Tc270Nw150
      OP
      I don't know why you say Alameda is the worst. Schools in castro valley and Pleasanton are great. Regardess it's going up over there. We saw a house in Oakland, small 3BR 1BA listed for 1.1 millon. It was sold eventually for 1.7 million!!
      May 15
    • Salesforce tugake
      What's wrong with Castro Valley? We bought here a couple of years ago and are happy. Kids not in school yet though but hearing good things. Plenty of 1M+ houses around where we are at (upper CV)
      May 15
    • New / Eng Tc270Nw150
      OP
      Some people have wrong impressions on east bay, but it's been growing fast. The zipcode on this house has been 4th highest growing in the nation.
      May 15
  • Wells Fargo qUyB01
    More important thing is how did your Tc go from 150k to 450k in a year ๐Ÿ˜‚
    May 15 3
    • New / Sales LadyCloser
      I also want to know!
      May 15
    • Trend Micro ifelifelse
      He got married to a 300k wife?
      May 15
    • New / Eng Tc270Nw150
      OP
      Partner was not in the job market last year. I made 150k last year, changed job to 270k. Partner got 180k base and a whole lot of paper money.
      May 15
  • This comment was deleted by original commenter.

    • New / Eng Tc270Nw150
      OP
      In a school where we wrote from right to left. Good catch
      May 15
  • Amazon brb29
    I think itโ€™s a reasonable rate. Will wait a while for it to go down
    May 15 3
    • New / Eng Tc270Nw150
      OP
      So you're saying I wait and not buy now?
      May 15
    • Cadence / Product
      luna.

      Cadence Product

      BIO
      .
      luna.more
      He is saying not to wait
      May 15
    • New / Eng Tc270Nw150
      OP
      Yeah thanks.
      May 15
  • Microsoft Rhino
    Recession looks imminent and so does a rate cut in next year. Its a tricky situation imo
    May 15 7
    • New / Eng Tc270Nw150
      OP
      Look at historical interest rates. It was highest in 2008 then 2 years after recession it dropped.
      May 15
    • New / Other
      DuQvV7y

      New Other

      BIO
      Did stuff. Hustled hard. Retired
      DuQvV7ymore
      ๐Ÿคฆโ€โ™‚๏ธ It dropped *because* of the recession

      Rate cuts stimulate growth
      May 15
    • New / Eng Tc270Nw150
      OP
      Although doesn't make sense to me too. Fed increases rates to drop during recession, but it takes time to recover
      May 15
    • Apple industry
      Why you think recession is imminent
      May 15
    • New / Eng Tc270Nw150
      OP
      Ok you're right. My point was we may be 2 years from recession and even 1 year after rate drop, the rates may be higher than current rate. So it's very possible that I end up buying at the same rate or worst if I wait.
      May 15
  • Google pmperson
    Can you get a HELOC or 2nd mortgage for the remaining amount rather than a single $900K mortgage?
    May 15 3
    • New / Eng Tc270Nw150
      OP
      I'll ask my lender. It may make sense for my case. I get cash bonus in Sept and first year RSU in December. I can put all of that cash in HELOC.
      May 15
    • Salesforce tugake
      This is what we ended up with. Google 80/10/10 loan
      May 15
    • Google YAPTRF
      Call up bank of the west. They offered the best 80-10-10 when I shopped around
      May 15