Lower purchase price or lower interest rate? Need your help!

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I wanted to get your thoughts on the scenario below. Would you rather choose option 1 (lower home price) or option 2 (lower interest rate). Ultimately the mortgage ends up being the same. Let’s assume you want to sell the house in 5-7 years, this is a primary residence. To me option 2 sounds better but wanted your feedback.


  • With Option 2, you spend $100 more a month in interest.
  • With Option 2, if you were to pay off the loan in 30 years, you’d be spending $26K more in interest.
  • With Option 2, you saved $33K on the sales price.
  • With Option 1, you have a higher bar to increase your home value at ($595K vs. $562K)


@Mark K. you take the lower purchase price very time for a variety of reasons. First of all, if you go to sell you can't sell the loan... you want that extra equity! Secondly, your taxes are typically based on the sales price which means they will be a bit lower if you get a lower sales price. In the Chicago area, 30k can mean a fairly substantial difference in annual tax bill (to the tune of 2k per year in some neighborhoods). I see no reason to take the interest rate scenario. 

Many experienced investors tell me not to obsess over an interest rate. I have never held a loan for more than two years on an income property as my goal is to create value and then to trade up into larger properties. Long term interest rates mean very little in that scenario.