Taking $97,800 mortgage for 20 years but the total amount I will pay is $230,000?

[clatoden99]

I am currently taking a mortgage for 20 years, paying approximately $940 for 240 months. After some calculation, I found that total I must pay is about $230,000 in 20 years. however, using present value/future value, I estimate that the interest rate is roughly 4%. Is this a good investment?

[dawnwes]

Is it a good investment to pay $230K for a roughly 100K home? No, but you do need to live somewhere.

Can you handle a 15 year loan? 2.7% if you have good credit.

Editing:

I didn't have time earlier to look all of this up.

A $97,800 loan on a 30 year fixed at 4% has you paying a total of $70,288 in interest. That is not $230K, that is $168,088 over a 30 year span.

Over a 20 year span, it is $44,435 in interest, making the total $142,235.

[disneysteve]

I am currently taking a mortgage for 20 years

Is this a good investment?

Is this for your own home to live in or for a rental property to generate income?

You own personal home is not an investment - it's your home.

If it's a rental property, you need to look at the overall numbers. Will the rent cover your costs? If not, how much will you need to spend each year to carry the property?

[Singuy]

I think the OP added property tax and home insurance into the equation if the interest is at 4% (and perhaps even PMI).

Another thing to think about is inflation. Sure the house is worth 97k today..but can you buy the same house in 20 years for 97k just due to inflation alone?

Also like what the other person said..you have to pay to live somewhere..can't be comparing this to living with your parents.

[disneysteve]

I think the OP added property tax and home insurance into the equation if the interest is at 4% (and perhaps even PMI).

That makes more sense.

$97,800 for 20 years at 4% is a payment of $592.65, not $940.

[Fishindude77]

Glad to see you are looking at the total cost over the life of the loan. Many folks just look at the monthly payment. This is a good illustration of how you can strap yourself into a situation where you are an slave to debt, with a huge amount of your income going to nothing but interest.

[disneysteve]

Glad to see you are looking at the total cost over the life of the loan. Many folks just look at the monthly payment. This is a good illustration of how you can strap yourself into a situation where you are an slave to debt, with a huge amount of your income going to nothing but interest.

It also illustrates what we often try to tell people when they say they need to buy a house because rent is "throwing money away". OP said the payment would be $940. The actual mortgage would only be $593. The other $347/month is for taxes, insurance, PMI maybe. And that doesn't count utilities, furnishings, maintenance, and repairs.

People look at one number - the rent payment vs. the mortgage payment and think owning a home is cheaper or about the same - but they don't look at the total costs involved in owning vs. renting.

[greenskeeper]

People look at one number - the rent payment vs. the mortgage payment and think owning a home is cheaper or about the same - but they don't look at the total costs involved in owning vs. renting.

Purchasing a home will always be cheaper than renting. At the end of the mortgage you have an appreciating asset.

With renting you never have an "end" so that money is in fact wasted.

As far as home maintenance, unless you bought the house from "the money pit" then you will STILL come out ahead in the end.

[disneysteve]

Purchasing a home will always be cheaper than renting. At the end of the mortgage you have an appreciating asset.

The fact that you are building equity is secondary. And if they end up selling in 5-7 years which is the average I think, there often isn't much if any appreciation.

A lot of people come here and say, "I'm paying $1,000 rent and that's what my mortgage would be so I can afford a house." They don't realize that their actual house expenses might be 30 or 40% higher than that mortgage payment. Sure they can afford $1,000 but can they afford $1,150 or $1,275, or $1,400? People end up house poor partially because they don't look at the overall cost of ownership.

[corn18]

Purchasing a home will always be cheaper than renting. At the end of the mortgage you have an appreciating asset.

With renting you never have an "end" so that money is in fact wasted.

As far as home maintenance, unless you bought the house from "the money pit" then you will STILL come out ahead in the end.

Not if you only live in the house for 3-5 years.

[disneysteve]

Not if you only live in the house for 3-5 years.

Exactly. I've always said not to buy unless you intend to be there for at least 10 years.

[Petunia 100]

Purchasing a home will always be cheaper than renting. At the end of the mortgage you have an appreciating asset.

With renting you never have an "end" so that money is in fact wasted.

As far as home maintenance, unless you bought the house from "the money pit" then you will STILL come out ahead in the end.

Only if you think being homeless is an adequate way to live.

[dawnwes]

I think the OP added property tax and home insurance into the equation if the interest is at 4% (and perhaps even PMI).

Another thing to think about is inflation. Sure the house is worth 97k today..but can you buy the same house in 20 years for 97k just due to inflation alone?

Also like what the other person said..you have to pay to live somewhere..can't be comparing this to living with your parents.

So the comparison is between renting with no taxes and insurance to buying?

I know I put my taxes and insurance into my "what we can afford" but I would never include it in the total of what I have to pay for the house.

[greenskeeper]

Not if you only live in the house for 3-5 years.

Exactly. I've always said not to buy unless you intend to be there for at least 10 years.

Right and wrong. I'm thinking long term that after 30 years you'd own the house whereas renting you'd have nothing to show for it.

What if the person bought a house at the bottom of the housing market and sold 3 years later for a 50% profit?

Sure the less years you are in the house the bigger chance you take of losing money to renting. But the rent money each month is gone and never coming back.

Owning outright trumps renting, leasing, credit card financing, etc anything.

[corn18]

Owning outright trumps renting, leasing, credit card financing, etc anything.

Agree.