How do you justify paying 100’s of thousands just in mortgage interest? (PMI, fixed rate)
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
I view my current home as a place to live, not as an investment. I really do not care if the value dropped to a dollar tomorrow, except for attracting undesirable neighbors and taxes, the value has no impact on my life.
If I was looking to move or make money, well yea, I would be concerned.
Same here, it's a place to live and my total mortgage costs less than what it would cost me to rent a studio apartment or rent a room in someone's home.
It is overall. The problem last time was that banks were lending out money to people who did not qualify.( NINJAS, No Jobs, No Income, No Assets,) so they could later sell those loans off as investments to suckers on Wall Street as stable mortgage backed securities. . Watch The Big Short it explains a lot of the story.
It is overall. The problem last time was that banks were lending out money to people who did not qualify.( NINJAS, No Jobs, No Income, No Assets,) so they could later sell those loans off as investments to suckers on Wall Street as stable mortgage backed securities. . Watch The Big Short it explains a lot of the story.
I've researched enough. You're correct. However I don't think the job market is as stable as the news and White House make it sound. Interest rates have been artificially low for 10 years now. I'm calling bubble all the way.
The only thing that is different is what is causing the bubble, not that there is one. When homes are doubling in price in a matter of 5 years thanks to the FED printing money and pouring stimulus money out into the lender market and economy, along with artificially low interest rates, it's only a matter of time again before the roller coasters goes weeeeeeeeeeeeeeeee back down!
The average car payment is something in the ballpark of like $500 bucks nowadays, along with all the student debt out there. All it takes is a little down turn in the economy again to get the snowball to start gaining momentum downhill. Americans are way overleveraged.
The only thing that is different is what is causing the bubble, not that there is one. When homes are doubling in price in a matter of 5 years thanks to the FED printing money and pouring stimulus money out into the lender market and economy, along with artificially low interest rates, it's only a matter of time again before the roller coasters goes weeeeeeeeeeeeeeeee back down!
The average car payment is something in the ballpark of like $500 bucks nowadays, along with all the student debt out there. All it takes is a little down turn in the economy again to get the snowball to start gaining momentum downhill. Americans are way overleveraged.
The only thing that is different is what is causing the bubble, not that there is one. When homes are doubling in price in a matter of 5 years thanks to the FED printing money and pouring stimulus money out into the lender market and economy, along with artificially low interest rates, it's only a matter of time again before the roller coasters goes weeeeeeeeeeeeeeeee back down!
The average car payment is something in the ballpark of like $500 bucks nowadays, along with all the student debt out there. All it takes is a little down turn in the economy again to get the snowball to start gaining momentum downhill. Americans are way overleveraged.
No bubble here in MN. Of course we have minimal unemployment, high wages, a strong corporate base, a highly diversified economy and a huge middle class.
Except when the market takes another down turn, which it will, there goes your net worth with it. So many people think they are so savvy because they look wealthy on paper.
Unless you can ride the bad times out and avoid foreclosure and stick in it for the long haul, many people will look rich on paper until the next recession comes and they are out of jobs but still have a mortgage payment. OH, but the kitchen was just recently updated, so it's an investment! HA
This only matters to people who sell properties though in my mind. I paid for a house, it loses 50% value tomorrow for a few years, well if you sold tomorrow then yes I would lose. Why would someone sell when prices was down for a few years? Let it pick back up. I personally dont see the point in worrying, if its low, keep, if its high, sell if you want.
Otherwise, I would never even know values dropped because I dont look at values and such, all I know is owning a home is cheaper than renting in my area.
This only matters to people who sell properties though in my mind. I paid for a house, it loses 50% value tomorrow for a few years, well if you sold tomorrow then yes I would lose. Why would someone sell when prices was down for a few years? Let it pick back up. I personally dont see the point in worrying, if its low, keep, if its high, sell if you want.
Otherwise, I would never even know values dropped because I dont look at values and such, all I know is owning a home is cheaper than renting in my area.
Because they would need to sell it if they've lost their job and can't find another... and if they can't get out from under the mortgage because their home is worth half of what they owe, they're going to lose their home. It would be likely that many people would be in a similar position and so, rents will skyrocket because of demand. In a few years, they'll be too behind to ever catch up, if it's not already foreclosed. They'll be trying to time having decent-enough credit to get into a rental before getting behind on too many things and filing bankruptcy, if they can even afford that.
That's why people care.
It sounds like that could be a reason why your market's rentals are higher than home ownership as well.
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.
I hear you. However, the math says otherwise. We can change some numbers up if you want, but let's say you continue renting - at the same place or equivalent thereof. Your rent today is $1100. Let's say your average rent increases are 3% (that's probably very low, but let's be optimistic!). Your rent today is $13,200 per year. By 2048 (the end of your hypothetical mortgage), it would be $32,000 per year.
Now, let's say you got your $250,000 house at 3.75% for 30-years. Now, I don't know what principal the lender would demand, but let's say you could pay... $1100/mo, just like your rent. So we are going to take your rent payment and apply it to your mortgage's principal and interest.
If you pay that $1100 month... and let's say you were to increase your payment by... say... the same 3% your rent would go up instead:
Your 250k house would be paid off in 2038 (20 years instead of 30) at a cost of $375,000 and the interest portion would be $125,000. At this point, if you were renting... you would have also paid about $375,000 and have zero equity to show for it!
But... now let's say you kept that up. You kept putting away that "rent payment" for the next 10 years...
Your rent-increase-adjusted savings over those 10 years would add up to another $250,000. And let's not forget that the $250,000 you saved could be earning you interest somewhere... Whereas, poor "renting-you" would spend another $281,000 on rent with no equity to show for it. However, if you took that $250,000 and invested it conservatively at... even just 3%... you'd get (no surprise?) about $281,000 out of it.
With all that said, home ownership DOES have costs. Some of those costs are just a linear scale up from what you have now. You might be paying for utilities today (water, AC/heat) and you'll pay for it in a house at some multiplier (since the house is likely bigger). Some costs are brand new, like insurance, pest control, etc.
However, on paper (or the best one can do on a computer screen), you've seen that over 30 years of paying rent, you'd be paying about $660,000. Whereas, you could have that as equity in the form of your house (which would likely go up over 30 years) as well as an extra retirement account, collectively worth about $530,000. So that's what $130,000 in interest payments gets you.
You have to live somewhere. And if you live more than 30 years, the numbers don't get more favorable by renting. And keep in mind, I assumed 3% rent increase. That might be REALLY low. And I also assumed a 3% rate in the market... which also might be low over 30 years.
We’ve decided on a Condo rather than a house in order to keep the upkeep/maintenance costs low. Where we reside, HOA fees are only a few hundred bucks per month. Will it be the same when we buy? I doubt it, but it will still be lower than the upkeep/maintenance cost associated with house. I have a few friends who purchased homes in the area a few years ago and I hear the same thing from every one of them. “Owning a house is a money pit”. One of them is about to put his house that he only purchased 3yrs ago on the market and purchase a condo.
Not all homes are "money pits". I paid cash for this home September 1, 2017 , I downsized ,it is 10 years old. I have lived here just about 5 months now , I paid a total of 7$ for a toilet valve seal for this money pit so far and utilities . I have a home warranty that covers just about everything and I will pay the 400$ to extend it another year come September. This home would rent for probably about 1200 month so I would be out of 6k at this point if I were renting. I am a firm believer in buying a home, condo, mobile home or whatever and paying it off as quickly as you can .
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
