You alway pay market interest rates when you buy a house with a mortgage

The WSJ, which pretty clearly said now was not the time to buy a home when mortgage interest rates jumped from 3% to 6%, now seems to be saying that dropping from 7.7% down to 6.63% means it's time to buy.

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Say what?

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This is idiotic analysis. If you want to buy a house with a mortgage, do it. What you can afford will be determined, as always, by how much you put down and your income available to make mortgage payments.

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Did rates used to be lower? Yeah. You used to be younger, too.

So what? What is the point of discussing or worrying about that?

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I also see articles now about assuming low interest mortgages and buy downs.

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Read my lips: You always pay current mortgage market interest rates when you buy real estate with a mortgage. That is one of rules in my Reed's Rules of Real Estate Finance.

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Why are you not getting away with something and screwing the lender on an assumption? Because you're paying more for the house to get the low interest mortgage. How damned stupid do people have to be to need me to point that out?

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Same applies to a buy down. You pay the seller extra to take back a 3% mortgage. Is that very clever of you? No. You're an idiot.

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First, home mortgage interest is often deductible. The extra you pay for the buy down is not deductible. The buy down also triggers the original issue discount rules in the Internal Revenue Code. Those basically restate my rule above that you always pay market rate when you get a mortgage. They disregard the nominal 3% rate on the bought-down seller mortgage and make you report the deal for tax purposes as if you charged the current market rate. That changes what would have been capital gain taxed at low rates, if at all, to interest income which is taxed at the highest ordinary rate.

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Arguably, the buyer should also be able to deduct the current market interest rate of 6+% in spite of the nominal rate of 3% being on the mortgage document rate.

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In both the assumption and the buy down, you are paying the 6.63%, only in the form of a lump sum manifest in a higher price for the house.

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My rule that you always pay the current market mortgage interest rate when you buy a house with a mortgage is a subset of the well-known law of economics that there is no free lunch. And the IRS original issue discount rules are a rock solid application of my rule to the penny.

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When the WSJ approvingly tells you about assumptions and buy downs, they are revealing profound ignorance about finance and the income tax law. $400 a year to get ignorant laymen quality advice from the Journal!