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Old 12-03-2017, 09:43 PM
 
Location: Kansas City North
3,617 posts, read 6,736,896 times
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I never have gotten into that “I’m paying SO much interest” thinking. I just considered the whole payment, PITI, as “rent.” What We have always done is roll all the proceeds into the next house, and for the past few years, paid extra every month. We are currently building and we’ll be paying cash. The house we just sold appreciated $54,000 in seven years.
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Old 12-03-2017, 10:14 PM
 
Location: TOVCCA
8,262 posts, read 10,466,150 times
Reputation: 11838
Quote:
Originally Posted by louie0406 View Post
We’ve been doing some mortgage interest calculations, and it turns out that on a 250k home, we will pay over $100k in interest at 3.75% over 30yr years..
Ha ha, do you know how comparatively low that interest rate is? I bought at 8.875%. Lots of people did...and if you want a real shock, rates were an astounding 17.82% in Nov 1981! And yet, people still bought. Those kinds of interest rates was why there was so much refinancing in the last 30 years.

http://www.fedprimerate.com/mortgage_rates.htm
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Old 12-03-2017, 10:28 PM
 
Location: Sydney Australia
597 posts, read 299,782 times
Reputation: 868
Yes, the rates hit 17% here too. The main argument I have in favour of home ownership is that it is compulsory saving and only a few people would have the willpower to save that much otherwise.
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Old 12-03-2017, 10:33 PM
 
Location: NE Mississippi
11,295 posts, read 7,365,427 times
Reputation: 16918
Quote:
Originally Posted by louie0406 View Post
My wife and I have been flirting with the idea of purchasing our first home. Both of us are in our late 30’s and have no children, nor do we plan to. We are currently renting in a wonderful gated community in Florida’s gulf coast. We pay $1100/month for a 2br, 2bath, 1200sq ft apt. Amenities include 2 swimming pools, jacuzzi, dog park, fitness center, car garage, and storage room. We can easily afford the rent as we split everything 50/50 and are able to save/invest excess cash.

We’ve been doing some mortgage interest calculations, and it turns out that on a 250k home, we will pay over $100k in interest at 3.75% over 30yr years. Call me crazy, but I just cannot justify that. Is there something that I’m just not understanding? On top of that, you’re on the hook for taxes, insurance and basic maintenance and repairs of your home.

The only benefit that I can see from owning a home is that you have more private space and nobody can evict you (unless you stop mortgage or tax payments). Other than that, I dont see the upside.

I see the argument all the time of how “you’re just throwing money away by renting as you build no equity and are just lining someone else’s pockets”. Well aren’t you lining the pocket of these banks buy paying an exhorbanant amount of interest over the years?

Why shouldn’t I just keep my $50k (20%) down payment in the bank and continue to save and invest while paying an affordable rent instead of locking myself into a long term loan paying an insane amount of interest?

Again, we are new too all of this and are just looking for some information on how buying a home rather than continuing to rent would be financially beneficial to us because I dont see it.

Thanks...
If you are smart and lucky you only have to pay for a house once in your lifetime. So use a 15 year mortgage and get it done. After that, when you move you take the money with you.

You will not believe how smart you will feel in 20 years.
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Old 12-04-2017, 06:56 AM
 
379 posts, read 177,970 times
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If you are smart and lucky you only have to pay for a house once in your lifetime. So use a 15 year mortgage and get it done. After that, when you move you take the money with you.

You will not believe how smart you will feel in 20 years.


This , I have no mortgage . I pay 500 / month for utilities , property taxes and insurance total. I am encouraging both off my sons to buy a property and pay it off quickly, this is the key to financial freedom and of course no car payment either.

Proverbs 22:7 The rich rule over the poor, and the borrower is slave to the lender
****
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Old 12-04-2017, 07:05 AM
 
Location: Cary, NC
31,535 posts, read 55,183,134 times
Reputation: 30099
You have what you want and need and prefer to rent?
Then.... Rent.
Wanna own?
Buy.

I bought because I wanted at some point to own an unecumbered deed to a piece of dirt. I have more protections as an owner than I do as a tenant.
Interest is the cost of leverage, of using someone else's money to achieve a goal.
Don't want to pay interest?
Sacrifice lifestyle and pay cash when you have it accumulated. Plenty of buyers do.

But, significant "interest" is baked into your rent payment, I would bet.
It just isn't a line item in your lease or rent bill.
So you are paying the landlord's interest on a note, with the additional expense of providing them with cash flow and appreciation.

Back to the top...
You gotta have shelter. Buying or renting are adult choices. Living in Mom's basement is hardly a long-term solution.
Do what you want to do, and don't rationalize or defend your choices.
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Old 12-04-2017, 08:02 AM
 
903 posts, read 396,178 times
Reputation: 2255
Quote:
Originally Posted by Okey Dokie View Post
I never have gotten into that “I’m paying SO much interest” thinking. I just considered the whole payment, PITI, as “rent.” What We have always done is roll all the proceeds into the next house, and for the past few years, paid extra every month. We are currently building and we’ll be paying cash. The house we just sold appreciated $54,000 in seven years.
Yes, we don’t break out interest either. We do apples to apples what-leaves-the-account-each-month comparisons, so it’s rent and renter’s insurance against a mortgage and homeowner’s insurance, and no equity pitted against no flexibility to move quickly. There is an opportunity cost in a downpayment too, but with s healthy retirement portfolio it’s not a big deal personally.

So when my rent is still higher than my mortgage and all the accoutrements? Yeah, no brainer for me. But as I said upthread, it’s very individual and one of those things that varies so much by life situation, number of dependents, the local market, etc.
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Old 12-04-2017, 09:37 AM
 
10,248 posts, read 6,445,192 times
Reputation: 10821
Quote:
Originally Posted by louie0406 View Post
My wife and I have been flirting with the idea of purchasing our first home. Both of us are in our late 30’s and have no children, nor do we plan to. We are currently renting in a wonderful gated community in Florida’s gulf coast. We pay $1100/month for a 2br, 2bath, 1200sq ft apt. Amenities include 2 swimming pools, jacuzzi, dog park, fitness center, car garage, and storage room. We can easily afford the rent as we split everything 50/50 and are able to save/invest excess cash.

We’ve been doing some mortgage interest calculations, and it turns out that on a 250k home, we will pay over $100k in interest at 3.75% over 30yr years. Call me crazy, but I just cannot justify that. Is there something that I’m just not understanding? On top of that, you’re on the hook for taxes, insurance and basic maintenance and repairs of your home.

The only benefit that I can see from owning a home is that you have more private space and nobody can evict you (unless you stop mortgage or tax payments). Other than that, I dont see the upside.

I see the argument all the time of how “you’re just throwing money away by renting as you build no equity and are just lining someone else’s pockets”. Well aren’t you lining the pocket of these banks buy paying an exhorbanant amount of interest over the years?

Why shouldn’t I just keep my $50k (20%) down payment in the bank and continue to save and invest while paying an affordable rent instead of locking myself into a long term loan paying an insane amount of interest?

Again, we are new too all of this and are just looking for some information on how buying a home rather than continuing to rent would be financially beneficial to us because I dont see it.

Thanks...
250K divided by 30 years is $695 a month. 100K in interest divided by 30 years is $278 a month.

That's less than $1K a month.

You payment will actually be closer to $1200 a month and you will pay more like $160K in interest.

Also keep in mind that you need to put money down so you don't pay interest on that amount, but you do have to pay for insurance which is high in Florida but less for newer homes and taxes which are not so high in Florida.

Plus if you pay $100 extra a month in principal each month that will knock out a few years of your mortgage payment.

In 15 years rents may double but your mortgage payment will stay the same.

Renting for 30 years will cost you at least $432K plus rents generally go up each year.

Keep in mind when you own a home it's an investment that you can sell and later downsize and your home can double in value. When you rent you have noting to show but a place to live that you can be asked to move out of.
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Old 12-04-2017, 09:45 AM
 
4,536 posts, read 11,524,543 times
Reputation: 3042
Quote:
Originally Posted by louie0406 View Post
My wife and I have been flirting with the idea of purchasing our first home. Both of us are in our late 30’s and have no children, nor do we plan to. We are currently renting in a wonderful gated community in Florida’s gulf coast. We pay $1100/month for a 2br, 2bath, 1200sq ft apt. Amenities include 2 swimming pools, jacuzzi, dog park, fitness center, car garage, and storage room. We can easily afford the rent as we split everything 50/50 and are able to save/invest excess cash.

We’ve been doing some mortgage interest calculations, and it turns out that on a 250k home, we will pay over $100k in interest at 3.75% over 30yr years. Call me crazy, but I just cannot justify that. Is there something that I’m just not understanding? On top of that, you’re on the hook for taxes, insurance and basic maintenance and repairs of your home.

The only benefit that I can see from owning a home is that you have more private space and nobody can evict you (unless you stop mortgage or tax payments). Other than that, I dont see the upside.

I see the argument all the time of how “you’re just throwing money away by renting as you build no equity and are just lining someone else’s pockets”. Well aren’t you lining the pocket of these banks buy paying an exhorbanant amount of interest over the years?

Why shouldn’t I just keep my $50k (20%) down payment in the bank and continue to save and invest while paying an affordable rent instead of locking myself into a long term loan paying an insane amount of interest?

Again, we are new too all of this and are just looking for some information on how buying a home rather than continuing to rent would be financially beneficial to us because I dont see it.

Thanks...
Would a 2BR/2BA condo of the same caliber as your apartment cost $250k in your area ?
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Old 12-04-2017, 09:54 AM
 
10,139 posts, read 22,366,598 times
Reputation: 8239
I can never tell if a silly question like this is click-bait or a person who is just in the dark.

Oh, well. I'll fall for it again.

When you pay rent you are paying a landlord for the use of his asset. an apartment wrth $250k for example.

When you borrow $250k you are paying the bank for the use of their asset, i.e. $250k of cash.

Do you think there is a difference?
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