You:
Find your new home on the market
today for $1,000,000. Knowing you have negotiating power, you put an offer in for $980,000 and it gets accepted. Securing an 80% loan at 6% leaves you with a payment of $4,700 including principal and interest.
Your Friend:
Decides to wait several months for
interest rates to drop. They find an identical home to yours, but it is now listed at $1,100,000. Interest rates have fallen and the market is once again extremely competitive. They purchase the home at full price in a multiple-offer situation. Securing an 80% loan, at a 5% interest rate they have a $4,724 payment including principal and interest.
At the same time, your friend is closing. you are refinancing. You now owe $784,000 on your house, refinance to a 5% interest rate, and a principal and interest payment of $4,209. You've also just gained $100,000 dollars in equity.
The moral of the story...buy now and refinance later.
If you buy today at a 6.5% interest rate, and then refinance to 5.5% when rates drop more: you win twice!
