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Old 06-29-2012, 08:10 AM
 
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Quote:
Originally Posted by frewroad View Post
But this doesn't make any difference. The party that sold the house is now homeless. They have to spend that $200K somewhere else in order to purchase a home. Furthermore, anyone buying a home in the 1980s was dealing with interest rates above 10% and in the early 80s as high as 18-20%. i.e. buying a $100K house then was a whole lot harder and took a lot more sacrifice than buying a $250K home now. The difference between someone who paid off their home vs someone who took a 30 year loan and made minimum payments is the paid in full guy has close to an extra $100K in equity and 10s of thousands more in saved interest in his pocket.

In any case, it doesn't change what I said. It's not the payment you are making or the interest you are paying. The only important thing is the amount you owe and how long it will take to pay it off. For people who are only focused on how much home they can get for as small a payment they can make, this concept is quite difficult to understand. In these days of declining real estate prices buying a home with as little down as possible makes no sense. There is a good chance they will put themselves underwater and at best have put themselves into permanent servitude to the bankers.
30-year loan at 12% interest on an $80,000 loan (after putting the 20% = $20,000 down on a $100K house), principal and interest = $822.89

30-year loan at 4% interest on a $180,000 loan (after putting the same $20,000 down on a $200K house), principal and interest = $859.35. And this person will also have PMI.

How exactly is that a lot easier? And those numbers were being conservative. Interest rates were really only above 12% between 1980-1985 (Primary Mortgage Market Survey Archives - 30 Year Fixed Rate Mortgages - Freddie Mac) and by the early 90's (when the boom in Charlotte probably really started so we can keep this thread on this forum) it was mostly below 10%. I also only used the example of a $200K house now even though you said it's easier for a $250K house.

Yes, 30 years is a long time to pay for one thing, but no one's stopping you from paying it off earlier. The monthly payment is a pretty important part of it, especially since most loans nowadays are fixed. As long as you don't overextend yourself on that and do have some savings in case of emergency, the world isn't going to end if people get loans without putting 20% down. That said, I do agree that you should put something down.

Quote:
Originally Posted by Sigma67 View Post
Bought a house in Fort Mill last year with 3.5% down and no mortgage insurance....and got to keep money in the bank. Really can't beat that in my opinion
How the heck did you pull that off?
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Old 06-29-2012, 08:16 AM
 
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Quote:
Originally Posted by GoPhils View Post
30-year loan at 12% interest on an $80,000 loan (after putting the 20% = $20,000 down on a $100K house), principal and interest = $822.89

30-year loan at 4% interest on a $180,000 loan (after putting the same $20,000 down on a $200K house), principal and interest = $859.35. And this person will also have PMI.

How exactly is that a lot easier?
$822 in 1985 = $1,493.77 in 2005 money. So taking inflation into account that $100K house in 1985 was costing that family the equivalent of almost $1500/month in 2005 money.
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Old 06-29-2012, 08:18 AM
 
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Quote:
Originally Posted by GoPhils View Post
30-year loan at 12% interest on an $80,000 loan (after putting the 20% = $20,000 down on a $100K house), principal and interest = $822.89

30-year loan at 4% interest on a $180,000 loan (after putting the same $20,000 down on a $200K house), principal and interest = $859.35. And this person will also have PMI.

How exactly is that a lot easier?
You didn't state time period, so I will compare 1985 to 2005.

$822 in 1985 = $1,493.77 in 2005 money.

So taking inflation into account that $100K house in 1985 was costing that family the equivalent of almost $1500/month in 2005 money. So using your own example, the $100K home was far more expensive.
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Old 06-29-2012, 11:22 AM
 
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Yes I know there was also inflation. I was looking for some yearly income figures by year but couldn't find much. But okay maybe I should have said 90's instead of 80's originally

So let me be a little less conservative in my estimates then.

P&I on a 30-year loan at 9% interest on $80,000 = $643.70
even at 10% interest it's $702.06

P&I on a 30-year loan at 4% interest on a $230K loan (to use your $250K comparison) = $1.098.06. With PMI you are probably looking at about $1200/month.

According to Inflation Calculator: Bureau of Labor Statistics, $702 in 1990 = $1234 today, and $643.70 in 1990 = $1131 today.

So they are similar, which is really all I was saying. Yet the person that bought the house in 1990 is probably the same one calling people irresponsible for not putting down 20% today.
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Old 06-29-2012, 12:34 PM
 
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By 1990, $100K would not have bought much of a house. In 1992 this would get you a starter tract house in Derita. I know because I sold one for about this price at that time.

Regardless of that however your example does not show anything about the 20% rule of thumb. It was more important in 1990 than it is now because interest rates were higher. Furthermore average household income has dropped back to 1993-94 levels and that means housing prices are headed there too.

If the party in 1990 still had the home now, put the minimum down and was paying the minimum payment on a 30 year mortgage, they would not have much of gained anything in equity. Furthermore they still owe 8 more years payments to the bank. However if the party in 1990 had put down 20% as I originally said, and also paid ahead and paid off that house in 2000, they they would have 12 years of house payments in the bank plus the entire real estate equity. It's a hugely different financial situation.

As I said before, people who like to remain at 100% debt and paying the minimum don't want to consider what this rather simple math says but they are giving away their financial future. It's not statement of being irresponsible or not, but rather nothing but a simple fact. it becomes irresponsible when the results end up in the situation that millions upon millions find themselves now.
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Old 06-29-2012, 01:49 PM
 
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$100K wouldn't have even bought much in Charlotte in 1990? I wasn't here then but I find that hard to believe.

Here's a couple I found without searching very long (I know nothing about these houses other than they came up in my search):

6732 Carmel Hills Dr. 3 bed/2.5 bath 2000+ sq. ft. over half acre in South Charlotte: sold for $110K in 1992 and $204.5K in March 2012

2847 Briar Ridge Dr. 4 bed/2.5 bath 2500+ sq. ft 1/3 acre also in South Charlotte: sold for $108K in 1986 and $205K in May 2012

So someone who put 3.5%-5% down in 1990 on a $100K house wouldn't have any equity today? Huh???

Do you use facts to back up anything you say?

Last edited by GoPhils; 06-29-2012 at 02:01 PM..
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Old 06-29-2012, 04:07 PM
 
Location: Up above the world so high!
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Quote:
Originally Posted by frewroad;24958455[B
]By 1990, $100K would not have bought much of a house. In 1992 this would get you a starter tract house in Derita.[/b] I know because I sold one for about this price at that time.

That's totally not true TOTALLY.

We bought a fantastic 1800 square foot home at the end of 1989 in a very desirable area of southeast Charlotte for $89,500.

This was the price range for many, many nice homes we looked at before we bought the one we did. At that time, $145,000 was a HUGE amount to pay for a really nice home in most of Charlotte.
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Old 06-29-2012, 04:33 PM
 
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Quote:
Originally Posted by BBSLM View Post
If you're talking about cars, it's actually 'bimmer'.

'beamers' are bmw motorcycles.
I stand corrected. That's twice this year already that I've been wrong.

BMW Car Club of BC - bimmer vs beemer perspective
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Old 06-29-2012, 04:49 PM
 
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Quote:
Originally Posted by lovesMountains View Post
That's totally not true TOTALLY.

We bought a fantastic 1800 square foot home at the end of 1989 in a very desirable area of southeast Charlotte for $89,500.

This was the price range for many, many nice homes we looked at before we bought the one we did. At that time, $145,000 was a HUGE amount to pay for a really nice home in most of Charlotte.
I looked at a home in SE Charlotte with similar specs in 1993 for $189,000. (Near Cotswald) I didn't buy it because the furnace core was cracked and the owner didn't want to pay for it.

We have different memories on the matter however I don't deny what you said. However it doesn't change what I said about putting down on a home. This is what is being argued in the hypothetical example given.
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Old 06-29-2012, 05:10 PM
 
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If my math is correct, the median home price in Mecklenburg County in 1990 was $132K (Mecklenburg County .org Real Estate). Today it is $187K according to C-D.

But are you still saying someone that put down 5% in 1990 on a $100K house would have no equity? Value increase aside, even if they stuck with their 9% loan (which they obviously wouldn't have) and didn't pay anything extra, after 22 years the principal is down to about $50K.
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