Quote:
Originally Posted by gamecock43
Yes, if you pay interest over 30 yrs you end up paying about double the original price of the house. Snave up above explains it nicely; If you get a $200,000 loan at 6% on a $250,000 house, then you will pay $431,000 total or (231,000 in interest) At the end of the 30 years. On top of that, you will be paying taxes, insurance and maintance.
Now to add to that example, lets say over the 30yrs you spend $5,000a yr in insurance, taxes, maintance. Thats an additional $150,000? (am I calculating that right? holy cow!) that has been paid over the 30 yrs and also needs to be recouped when selling the house. Your $200,000 house needs to sell for $581,000 to break even. (is that calculated correctly? I'm still very new to this business) But regardless- its these numbers that scare me. Do I have almost $600,000 to spend on a house over the course of my lifetime? maybe. Have I found a single listing yet that costs $200k but looks worth over half a million? not yet.
Disclaimer- before people jump down my back on how I am still going to be spending a large amount in rent over those 30yrs if I choose not to buy- I know that. Thats why I'm still considering buying.
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A couple comments:
1) These numbers assume a 30 year loan. I don't recommend that long of a term. 15 or 20 years at most.
2) You need to take inflation into consideration. In 15 years, rent will likely be twice as expensive (in today's dollars) as it is now. Fifteen years from now your mortgage payment will not have changed.
3) Tax savings from property tax and interest deductions.
4) The value of your home will increase.
Don't let the big numbers frighten you. I find it very hard to believe that renting is more cost effective than owning in the long run.