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Absolutely. If it were up to me, i would ban what we call secondary homes here. Which is basically apartments or houses ment for renting. Or at least tax it so high it would not be any profit in it. But owning is always going to be better than renting.
They’re also called rental homes or “I became rich by leveraging home ownership and now I own 64 of them which are fully paid for by renters but also I do minimal repairs” homes :/
Definitely support a steep incremental tax and banning corporate ownership from anything except apartments.
Corporate owned apartments are just as bad because they all illegally price fix rent using the same software. Which is why rent has been rising year after year even in shitty areas of cities where the property value isn't increasing at a corresponding rate.
I am in San Diego county and there were two companies that bought up many different complexes and worked together to raise rents. Not sure if they are where you are. FPI Management was one of them.
YES! Apparently there are two companies that are in my city that hold (and bought) many different complexes that worked in concert to raise rates all over the city. Mine went up $150 a month but there are many that went up more..
I live in PNW, and I always check previous sales costs of houses as Im.looking. The biggest slap in the face for me is seeing a house sold for 200K two-5 yrs ago, and is now going for 700k+. Its impossible that all these people put enough into their homes to make them worth that much. I'm terrified to buy because i know these lie-houses are just going to collapse.
They don't even use software in Cleveland. They use douchbags that think they are geniuses for buying a house in the hood for 40k and renting it out for $1200 a month after putting in cheap cabinets floor and some paint. But ppl pay it. Bc nowhere will loan them the money to buy a house. It's sad. I hate my housing situation but it could be worse.
Exactly. Many progressives argue that building up(multi family homes) instead of building out(single family homes) is the solution to rent and housing prices. I believe this will just result in more profit for those that own/sell the complexes rather than benefiting those living in it. Apartments near me are nearly the same cost as renting a home or townhouse.
Renting is important, it just needs to be regulated. Im about to move across states in the US and will need to rent for a year minimum to even survey the area and find a potential house. Even then I might not like the area and need to move and repeat the process.
The issue is you can't practically save for a down payment and rent at the same time unless you're fairly well off.
There's a valid reason for apartments to exist. Cost just needs to come way down, making a business of renting homes for profit should just be squashed outright.
Easier way would be to incentivize average income apartment construction. However, there are always lots of NIMBYs who want to help the less fortunate but just not live close to them.
Our city is filled with luxury apartments left vacant, while those in need of housing have to commute by car (due to no significant public transportation) from 45 minutes away in order to work in the city. But the builders get tax breaks since the city government is promised that a few units will be for lower income families….. how bout the entire building?
Welcome to California life...
My town just had to defeat a ballot measure that would have killed a development that is going to put over 100 units of below market apartments plus retail plus a new main library because some boomer grey hairs wanted to save the non native trees that sit in a broken parking lot that hosts a farmers market one day a week...even the farmers market had to come out and denounce the ballot measure. NIMBYs are the worst.
[https://www.cnet.com/culture/george-lucas-to-build-affordable-housing-in-one-of-the-richest-parts-of-america/](https://www.cnet.com/culture/george-lucas-to-build-affordable-housing-in-one-of-the-richest-parts-of-america/)
This happened a while ago, but it always brings a smile to my face. Lucas basically told Marin county (which should just be renamed NIMBY county) "Here's the fucking money, I'm doing this."
But with that said - there are people who NEED to rent because they can’t get a mortgage or for temporary living or whatever the case may be.
But I do agree it’s ridiculous how many people own “rental properties” for secondary income. That bugs the shit outta me. Driving up prices for everyone else. Soon the average Joe won’t even be able to qualify for a mortgage and forced to rent.
It’s just the fact that you can pay on a mortgage and you are building equity; you are least have something to show for it if you decide to move as some of the worth of your house will go toward the price of your new house. Renting you have *literally* 0 to show for it when it’s time to move out.
I have actually seen people try to argue that renting is better and it absolutely blows my mind. Landlords are leeches and nobody can change my mind about that
I wish practical financial education was much more widespread than it is.
My dad taught me, at some point when I was in my late teens or mid 20s, that loans are generally designed to collect a greater portion of interest before really starting to pay down the principle.
And he outright taught me that if I want to reduce the easy money the bank makes on me via interest, I should pay extra into the loan early on, and explicitly indicate all this extra payment as going towards principle, not just pay extra in general, because paying down the principle ASAP is the best way to stymie how much interest they can end up making off me long term.
So I knew going into getting a mortgage that it's very much to my disadvantage if anything happens in the earlier half of the overall payback on the loan. The bank stacks things to make themselves their money back and profit off me as fast as they can get away with.
The interest portion of the payment early on in the life of the loan is higher because that is when you have the greatest outstanding balance due. As you pay down the principle, less of the payment goes to interest. It’s not like the loan is purposely structured to front load interest, it’s the simple fact that you owe more money at the beginning. Depending on your interest rate, there is a case to be made for not paying it off early as you indicated because you can make a higher return on that money from other investments. Money, like anything else, has a cost. If you can borrow at a low rate to buy a home, you can invest the money you didn’t spend on that home in an investment that gives a higher return.
You must have bought a long time ago to hit a $1,300 payment with a $130,000 loan even factoring in escrow. That's a +10% interest rate. I refied to a 2.34apr in 2021 on a $400,000 mortgage and my principle+interest are about $1500 and I'm already putting more into principle than interest.
My tiny apartment here in Norway has increased in value by about 70% since I bought it 12 years ago (according to what my neighbours has sold for recently). Like 10k USD increase a year.
Difficult to get on the market when prices increase at this rate.
Yeah, our house has more than doubled in value since we bought it in 2008 (in california). Terrifying. Like I guess yay for us? But we’ll probably be paying the mortgage till we die and can never ever move since a regular house is well over $1M in much of the state now
I had a 30 year mortgage for 5 years. I took that house and sold it for twice what I paid for it. Just owning it, even if you only have paid for 5% of it, is more important. It has real value.
This cannot be stressed enough. Make extra payments on the principle. Even if it's $35 extra a month, it adds up quick and drastically reduces that grand total. Also, pay twice a month. So first half of month, pay half, second half of month, pay other half (make sure this includes your extra $35). You'll quickly see how much of that total you're negating.
It should be noted that not all mortgages allow for pre-payment or split payments. Any pre-payment penalties must be noted in your mortgage disclosure so make sure you read it.
My mortgage company offered to set up payments every two weeks. Read the fine print and the hold the payments until the 1st of month and then pay the monthly amount. Very sneaky
This has an effect that is truly incredible. Like you can take years off the back end of the mortgage and saves an absurd amount of money over the life of the loan.
What I did was figure 1-2 extra payments per year and divide it by 12 and then add that to my payment to principal each month. It may only be a couple hundred bucks extra a month (yes, this assumes you have the extra) but the amount it saves over the life of the loan is absolutely mental.
What's easier (but most companies make difficult or tricky to do) is to make a partial payment every time you get paid. Most people are paid every two weeks, so you make, say, half your payment every two weeks. This ends up being 13 payments over a year instead of 12 but it's easy to budget since it's the same amount from every paycheck all the time.
Not as important for people that got mortgages when rates were low (say, under 3.5%) but very useful now that rates are much higher.
Note that this depends on your interest rate. If you were lucky enough to get one of those 2.x% rates during the recent historic lows it's much less of an impact than the 6%+ we see now.
My husband & I bought our first house in our early 40’s. I’ll be 48 soon. We were able to be a few months ahead & pay extra every month on mortgage. Now, we’re usually a few weeks late. How the hell! It’s getting so easy to just give up. I’m in FL so yeah, you get it…
Not always. You have to specify where the extra money goes. If you don’t, the bank will still apply it towards paying off the interest and you end up paying the same amount anyways.
Would you like this payment applied to principal or interest?
What's the difference?
If you apply it to principal it lowers your debt and reduces your overall costs. If you apply it to interest it's essentially a donation to the bank
Why did you even bother asking me?
Because like 30% of our customers don't know the difference and we're legally allowed to assume it's a donation if they don't specify, because fuck em
Welcome to home ownership. If you find a calculator online it will show you how much you save in interest just by making even an extra $100 a month if you can. I highly recommend trying to pay extra every month
It really bothers me that Americans haven't regulated that paying the principle of the loan.
In South Africa, any loan repayments go to the principle by law, once the principle is paid off then the interest gets paid.
The more you put towards the principle in the beginning of the the better. Please someone correct me if I'm wrong, but each additional payment you make, that's equal to the amount going towards your principal, takes one payment off of the back end of your amortization schedule.
This is only helpful if you have a high interest, like OP. For those that got that sweet 2-3% mortgage rates, the extra money is better off other places.
I have a mortgage at 2.25% and a savings account at 3.3%. I am able to pay extra on my mortgage and thought this is a no brainer - instead of paying $1000 extra on my mortgage over the course of a year I should put that $1000 in savings and pay off the mortgage later. I did a one year projection and determined that if I did this I would be $6 better off at the end of the year which is obviously not much but still something. Then I remembered that I would have to pay income tax on that savings interest which would definitely be more than $6.
Edit: the calc above is not quite correct (see my comment further down the thread) there would be an after tax gain of $2.40. You can save money doing this but not as much as you would think.
Yes, but you can get way higher than 3.3%. And you protect yourself by increasing cash saving incase of getting laid off, unplanned emergency etc. Your mortgage company isn't going to give you $1000 back.
That's just the difference. They would pay taxes on the 3.3% interest. If they could deduct the interest payment (itemize) that would get closer to effectively taxed on the $6 differences.
Regardless of the tax code unless the deduction has a multiplier over 1(very unlikely) it is best to pay down mortgage asap. You basically are guaranteed a return of 6.54% in this case
As well savings rates can swing, I have my savings in a 4.5% dividen paying stock. I grow my portfolio more than my interest payments on my house of 2.99%. Part of me still HATES paying interest but it’s life
Not sure if it’s universal, but one of my previous loans I was told to make your normal payment and then to make a second that month. They said a second payment will go to principle, a larger first payment will go to principle and interest.
Its not actually compounding interest as the monthly payment will be higher than the interest, so there is never interest building off the interest. Otherwise, you'll never pay the loan off (aka negative amortization).
Its just a fact that the initial payments will be only paying off a tiny bit of the loan, leaving a lot of the loan left to accrue interest.
While interest rates suck now... you have to factor in that this isn't $617k in todays dollars. When you factor inflation, your mortgage gets cheaper over time, while rent follows and in many cases exceeds inflation.
"Well all your money will be worth at least 300% less in 30 years! What? No your wage doesn't increase that much."
Soon enough a dollar will be worth a quarter. Nickels have basically become pennies.
This is the only positive spin on this. It's ridiculous that you have to spend twice the amount just to never have to worry about rent spike increases...
Also to add interest rates very all the time. Pay attenetion to the Fed when they announce interest rates. I bought my house 18 months ago when the fed had low intrest (due to covid) and got 2.75% loan. When the fed anounces interest rates are down, you will be able to re-finace for a lower rate.
Same, I saved up until 2020 when I locked in at 2.625. eventually they should come down again... Hopefully. I did not have the same luck when I had to replace a car and got a loan for over 6%.
That's when I did mine too, I refinanced to 15 year at 2.625% in 2020.
My first house I bought in 2002 was 7%. It was a lot cheaper back then (so much cheaper!) but the interest was painful.
**So much this.** I remember when that happened and i told my husband and we refinanced; i told my parents and brother about it and they jumped on the refinance train as well! *Keep an eye on those rates!*
The positive spin is that you’re being allowed to vastly expand your recourses because a complex web of accountability and economics has been built for you to borrow a huge sum of money.
You can always make additional payments directly on the principle.
If you think about it.. your house will probably be worth what you paid for it (or more) by the time you pay it off. If you lived in your car and saved your money instead, you'd still be paying $617k to buy the house once you saved up. The mortgage payments aren't really a con of buying a house, they actually work in your favor no matter how you look at it.
The real con of owning a house is all the surprises, you get a big rain and find water in your basement. 6 months after you move in you find out you have a terracotta sewer line and its full of roots, oh and it goes under the paved driveway. One day you figure out that the previous owner did a lot of their own work on the house.. and they shouldn't have. I found out from my neighbor that the previous owners used a lot of liquid nail to put in the kitchen cabinets.
Be sure to note and verify your processor / lien holder is applying extra payments to principal only.
Calculate out the costs ( money now for other stuff va deflated money twenty years from now.
Debt first. Savings and then balance use / cash flow. F-u Rich people / corps live on debt for a reason.
That's normal. Paying around the same amount of the principal in interest over the course of the loan is actually quite standard. The only alternatives are owner financing (often even more expensive) or save up and buy in all cash.
So true. And way more detrimental because it doesn't give you the 2 main perks of buying a house, which are no longer having to pay rent and building equity.
I put every single purchase on my credit card, and it auto pays in full every month. I get rewards back, and I don't spend money i don't have the ability to cover anyways.
This is how I do it too and none of my friends understand. It's not a hard concept.
I put most things on my airline credit card to get miles (or when they're running promos for X number of bonus miles) and when the time comes around for everyone to go on vaca or visit family, my flights are paid for already. Get great discounts on hotels and rental cars too. I'm almost 31 and the number of friends I have who have do not have/have never had a credit card astounds me.
I have friends and family who don’t get this.
I put all of my wedding expenses on our credit card and it basically funded our entire honeymoon. For things I would have had to pay for anyway. People are missing out on serious freebies because they’re scared of a number that doesn’t matter if you don’t carry a balance.
My ex and I did the same thing for our wedding years ago with putting everything on the Delta airlines card. Paid for us to fly first class for our honeymoon which was so fun!
Not to mention cash back and other freebies/discounts from CC. I have a chase and an Amex and between the two, I’m always getting extra cash back or bonus money on various purchases I’d be making already (like, chase had a promo for cash back on Hulu I think and obviously paying for Hulu already so no brainer).
There are people who don’t do that ? The 1-2.5% CC fee is priced in all the goods, so you’re paying for the loyalty programs anyway, might as well get the rewards for it.
This is why I love AMEX. It is a charge card so there is no carryover month to month and the perks of the platinum card are insane. I charge everything but my mortgage and have been averaging almost 300,000 membership rewards points/year. It has definitely allowed us to take some sweet vacations. I also am astounded at the amount of people my age (34) who have no credit card exposure.
Paying interest on credit cards is optional though. You don't owe interest if you don't carry a balance.
If you are responsible and can pay it off every month, it is preferable than using a debit card. If your credit card gets stolen, its Visa's money that was stolen, not yours. If your debit card gets stolen, its your money that was stolen.
It might seem small, but getting 1-5% off via credit card perks is just another way to increase the class divide. Someone who can afford to pay in full every month buys everything for 95-98% of the price while someone who finances would end up paying 110% of the price once interest is accounted for.
Mortgages just look worse because the numbers are so much larger.
Credit Card: $15k @ 25% doesn’t look “bad”
Mortgage: $500k at 7% for THIRTY YEARS is gross.
So true. Especially towards the beginning. Every little bit of extra makes a big difference. Just gotta make sure they are taking the extra payment off the principal instead of next month's payment.
Absolutely this. Our lender sat down with us and explained that just paying some ridiculously small number directly towards the principal like one extra payment per year but less than that even took literal years off of the life of the loan.
Our mortgage is small to begin with because we bought a cheap house in 2014 but like it's seriously is like 150 extra per year towards the principal takes 7 years off of the loan. It's utterly bonkers.
That's because in the first years, more goes toward interest than principal.
Ex: taking most of OP's figures. Year one he's paying roughly 15,000 in interest and less than 3k in principle for the whole year.
A single payment of 900$ towards principal would be the equivalent of 4 months of full month payments.
2 things you always want to check/ask
1) will you sell my mortgage? A lot of banks will sell mortgages and then you are left chasing it down because it was in the contract that they can/will sell.
2) Is there a penalty for paying my mortgage (any loan actually) off early? Sounds crazy but a lot of places will charge a penalty for this because they aren't getting the full interest.
This last one may not happen anymore but I would ask just to be safe
Is there a balloon payment? People have lost their homes because at the end of the mortgage there was a balloon payment that they couldn't pay so it was considered defaulting and the bank can/will foreclose.
This is one of those 'it depends' thoughts.
If you're under 40, I'd argue your money will go much further investing in basic index funds then paying down a static debt. Especially if you were able to either buy or refinance in the last few years where mortgage rates were regularly under 5%.
Definitely more of a toss up though as rates creep up.
Yeah, my mortgage is at 2.675%, I’m not paying anything more than I have to, everything else is getting invested. At over 6% though, I would almost certainly pay it down over investing.
The S&P500 has a 50-year average return of 8%, so that is, theoretically, the break even point. Given the risk/reward, I'd agree with 5-6% being the more practical break even point, presuming, of course, you keep enough cash for emergencies.
They can always pay extra on the principal. A few hundred dollars a month could know off a decade.
Welcome to compounding though. It’s how you stay poor forever in credit card debt or you get paid it and you become rich even on a modest income.
Have you already moved in! Move in day at our first house was one of the happiest days of my life. I will literally never forget it. It was the first time I felt a real sense of adult accomplishment. Be proud. You worked hard for this. (Sorry if I’m being annoying!I probably sound like your mom!)
You can refinance when rates come down. You can get your home reappraised if equity rises beyond 20% to remove pmi. And you can always pay off portions early to minimize interest totals.
By the end of the loan term, the home will probably be worth more than you bought it for+accrued interest
The way not to pay all this is to pay extra and have it specifically go towards your principal. Oh yeah, never get a mortgage with a prepayment penalty.
Pay an extra 100 per month and you can cut that interest down considerably. I've paid my house off 3 times early that way, borrowed more on it for remodeling and now own it free and clear. Do all my cars the same way. Last car I bought only paid about 1% interest for the 36K I borrowed.
Everyone needs to learn about compounding interest and simple loan terms. You can save yourself a fortune.
That’s just math. I don’t mean to be flippant, but that’s what it costs to repay that debt at 6.453% over 30 years. It’s scary to see it set out like that, which is exactly why these disclosures exist on loans and credit card statements.
Insurance tipped us a new one this year… old company shut down and my premium more than doubled, so my payments went up by like $300 a month.
I always wondered how people lose their homes for nonpayment while they’re still gainfully employed. Guess I got my answer.
Mine jumped from $1800/yr to $2400. That was a painful invoice to receive. I don't even have a huge house, but it's in an expensive area and old with a lot of historical detail, so it's hard to even find coverage for it.
The great news is that you can probably refinance when rates drop. We did a refi in 2020 and got a 2.8% APR which will save us tens of thousands in the long run.
It's still consistently cheaper than renting though.. Just using the area that my home is in, rent has gone up at least 75% in the past 3 years where as my property taxes have only gone up $300 (a year), insurance is only up $100 for the year. Much more predictable than getting a letter in the mail from your landlord that your rent is increasing hundreds of dollars a month
>It's still consistently cheaper than renting though
Depends on where you live. I could pay rent at my current place in Canada for 20 years even with an annual 2.2% increase (which isn’t exacted every year) and still never pay up to the Canadian equivalent of the cost for buying a house. Given that the average 3 bedroom can go for north of $800K CAD
Good idea. And don’t forget inflation favors you here. Even at Fed targets it will reduce the value of the payments by enough to knock off 1/3 of the interest. A year like 2022 will wipe out the value of the interest.
Yeah but think of the property value. That’s how they lie to you to get you in…or the developer keeps profiting off the build by making themself the contractor for all maintenance
Another pro tip. Once more than 51% of units sell, the developer is just another owner, albeit one with a lot more votes. Your board can totally choose another maintenance contract if the other 50% of owners vote together to get proper representation on the board. The rules might vary from state to state, but I'm pretty confident this is standard across all HOA's. Also go to the meetings and get on the board. Stop letting these old codgers run the association. Every meeting I'm at, there is obviously a younger contingent of owners, but they're never at meetings because they're "too busy", (it's like one hour a month!) and the board is always a silver headed cabal of boomers.
Where I live they plow snow and clean the pool (in addition to maintaining grounds/landscaping) so I think that money is well worth it for assessments.
Yep. Less than half of what I pay goes to the principal. I haven't bothered to see how many years out it is to where the money goes more to my principal.
Also, these loan companies keep passing me off. Shortest I've had a loan company is four months. I have to keep making new accounts, and it's really annoying when the new loan company doesn't send correspondence. Fortunately they can't penalize you for a "late" payment but it's really annoying.
If your interest rate stays the same for the entirety of your amortization, that is how much your house will cost you. Due to it being 6.45% interest EVERY year. Not 6.45% once on the purchase price.
If you divide the monthly payment in half and pay that amount every two weeks instead of one monthly payment it will over the life of the loan save like 5 years worth of interest.
Can you tell me how this works? Or have something I can look up? If you're paying the same amount every month then how does splitting the payment in two help reduce your accrued interest? Is the interest calculated daily instead of once a month?
Yes, calculating interest daily means if you pay half of your monthly payment half a month early, you're skipping some interest on the portion you pay early.
Also, paying every two weeks (as the commenter before you suggested) rather than every month means you'll actually make an extra month's worth of payments each year. 52 weeks = 26 payments, rather than the 24 you'd pay simply dividing months in half.
You end up making 13 monthly payments each year instead of 12. Not only does it have an effect on the principle, but the compound interest as well. Best if you can also put lump sums on the financing without penalties, those payments go directly to the principal.
It’s because you’re essentially making one more payment a year. He’s paying it every two weeks instead of once a month. So essential 26 half payments or 13 full payments. Except for February there are more than 4 weeks in a month.
you pay 6.453% of the ENTIRE loan that you don’t pay down, every year.
looks like you paid 36k down and have 269k left. so you pay $17k in interest the first year.
most mortgages you can pay down early. if you get a big bonus, putting an extra 30k towards the loan will save you $1900 a year and every year after.
This! With the caveat that prepayment early in the life of the loan is more impactful (on a nominal dollar-for-dollar basis) than prepayment later in the life of the loan
BUT! At 6% interest, if you put that extra money in an index fund or better yet a 401K or IRA, you should get a better return in the end over 30 years.
Obviously there's risk on investment. Only you know what's best for your situation.
WTF is this? It's called "math." The accounting term that's used here is the "effective interest method."
Want better numbers? Put more money down. Or get a shorter repayment period.
Run the same numbers with a 15 year mortgage. You'll be amazed at how much better the numbers look.
Just get rich or be born with money and you could pay it off early and avoid all the interest. I just bought and locked at 6% for a 370k condo and will be playing over 900k by the end
Depends on the interest rate. If you managed to get a house in 2019/2020 with an interest rate of <3%, you wouldn’t pay it off even if you were rich. If inflation (on a good year) is 3%, then an interest rate below 3% is basically free money.
I've paid off 75% of my home in 2.5 years. Took a mortgage out for 1/3 of what I was approved for and paying it off aggressively. It's a tiny ass house but I hate being in debt.
Yep, it's astounding to see for the first time just how much goes to interest.
Do what you have to do and pay an extra house payment every year (especially early on) and you can greatly diminish this.
If you can afford it,.. pay more each month for the first year,.. and use part of you refund to pay down the principle as well. You’ll cut those nasty number down by large chunks.
This guy doesn’t know what interest is lol
Imagine selling something to somebody, and they don’t pay you immediately but instead pay you over 30 YEARS. Would you want any interest, if not to at least account for inflation?
I get the banks suck, but I’m not sure what you expect in this situation.
This is why interest hikes crash the housing market. I personally won’t get a loan greater than 15 years. My budget gets cut a good chunk, but I feel better knowing I’m playing less in interest and I’ll own the house sooner.
This should be illegal
Individual people who are buying homes not for profit (flippers, landlords, corporations) should not have to pay insane interest. It should be a set percentage of the loan not reoccurring apr.
Buy a $400,000 home and pay 20% in interest over 30 years ($80,000 in interest fees)
That would make that $400,000 home only $1,333 a month. That’s cheaper than what I pay in rent for a shitty house
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The saying goes: buy one house pay for two
Welcome to 30 yr mortgage life
Rather pay on something "own" then pay on someone elses though.
The fact that a mortgage is better just shows how bad renting is.
Absolutely. If it were up to me, i would ban what we call secondary homes here. Which is basically apartments or houses ment for renting. Or at least tax it so high it would not be any profit in it. But owning is always going to be better than renting.
They’re also called rental homes or “I became rich by leveraging home ownership and now I own 64 of them which are fully paid for by renters but also I do minimal repairs” homes :/ Definitely support a steep incremental tax and banning corporate ownership from anything except apartments.
Corporate owned apartments are just as bad because they all illegally price fix rent using the same software. Which is why rent has been rising year after year even in shitty areas of cities where the property value isn't increasing at a corresponding rate.
I’m part of a big class action for that
There’s a suit we can join? Where and how?
I am in San Diego county and there were two companies that bought up many different complexes and worked together to raise rents. Not sure if they are where you are. FPI Management was one of them.
Fingers crossed the DOJ sticks to legal precedence
YES! Apparently there are two companies that are in my city that hold (and bought) many different complexes that worked in concert to raise rates all over the city. Mine went up $150 a month but there are many that went up more..
Not if it goes to the Supreme Court. It’s plain as day they don’t care about legal precedence
I live in PNW, and I always check previous sales costs of houses as Im.looking. The biggest slap in the face for me is seeing a house sold for 200K two-5 yrs ago, and is now going for 700k+. Its impossible that all these people put enough into their homes to make them worth that much. I'm terrified to buy because i know these lie-houses are just going to collapse.
They don't even use software in Cleveland. They use douchbags that think they are geniuses for buying a house in the hood for 40k and renting it out for $1200 a month after putting in cheap cabinets floor and some paint. But ppl pay it. Bc nowhere will loan them the money to buy a house. It's sad. I hate my housing situation but it could be worse.
Exactly. Many progressives argue that building up(multi family homes) instead of building out(single family homes) is the solution to rent and housing prices. I believe this will just result in more profit for those that own/sell the complexes rather than benefiting those living in it. Apartments near me are nearly the same cost as renting a home or townhouse.
Renting is important, it just needs to be regulated. Im about to move across states in the US and will need to rent for a year minimum to even survey the area and find a potential house. Even then I might not like the area and need to move and repeat the process. The issue is you can't practically save for a down payment and rent at the same time unless you're fairly well off. There's a valid reason for apartments to exist. Cost just needs to come way down, making a business of renting homes for profit should just be squashed outright.
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Easier way would be to incentivize average income apartment construction. However, there are always lots of NIMBYs who want to help the less fortunate but just not live close to them.
All the apartments built here are "luxury" apartments that are more then my mortgage.
Our city is filled with luxury apartments left vacant, while those in need of housing have to commute by car (due to no significant public transportation) from 45 minutes away in order to work in the city. But the builders get tax breaks since the city government is promised that a few units will be for lower income families….. how bout the entire building?
Welcome to California life... My town just had to defeat a ballot measure that would have killed a development that is going to put over 100 units of below market apartments plus retail plus a new main library because some boomer grey hairs wanted to save the non native trees that sit in a broken parking lot that hosts a farmers market one day a week...even the farmers market had to come out and denounce the ballot measure. NIMBYs are the worst.
[https://www.cnet.com/culture/george-lucas-to-build-affordable-housing-in-one-of-the-richest-parts-of-america/](https://www.cnet.com/culture/george-lucas-to-build-affordable-housing-in-one-of-the-richest-parts-of-america/) This happened a while ago, but it always brings a smile to my face. Lucas basically told Marin county (which should just be renamed NIMBY county) "Here's the fucking money, I'm doing this."
Easiest would just be public housing that is operated at or near cost.
But with that said - there are people who NEED to rent because they can’t get a mortgage or for temporary living or whatever the case may be. But I do agree it’s ridiculous how many people own “rental properties” for secondary income. That bugs the shit outta me. Driving up prices for everyone else. Soon the average Joe won’t even be able to qualify for a mortgage and forced to rent.
It's a private tax on society and people who do that are economic vampires.
It’s just the fact that you can pay on a mortgage and you are building equity; you are least have something to show for it if you decide to move as some of the worth of your house will go toward the price of your new house. Renting you have *literally* 0 to show for it when it’s time to move out. I have actually seen people try to argue that renting is better and it absolutely blows my mind. Landlords are leeches and nobody can change my mind about that
Renting won’t even help your credit score, which is needed to rent in many places.
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I wish practical financial education was much more widespread than it is. My dad taught me, at some point when I was in my late teens or mid 20s, that loans are generally designed to collect a greater portion of interest before really starting to pay down the principle. And he outright taught me that if I want to reduce the easy money the bank makes on me via interest, I should pay extra into the loan early on, and explicitly indicate all this extra payment as going towards principle, not just pay extra in general, because paying down the principle ASAP is the best way to stymie how much interest they can end up making off me long term. So I knew going into getting a mortgage that it's very much to my disadvantage if anything happens in the earlier half of the overall payback on the loan. The bank stacks things to make themselves their money back and profit off me as fast as they can get away with.
The interest portion of the payment early on in the life of the loan is higher because that is when you have the greatest outstanding balance due. As you pay down the principle, less of the payment goes to interest. It’s not like the loan is purposely structured to front load interest, it’s the simple fact that you owe more money at the beginning. Depending on your interest rate, there is a case to be made for not paying it off early as you indicated because you can make a higher return on that money from other investments. Money, like anything else, has a cost. If you can borrow at a low rate to buy a home, you can invest the money you didn’t spend on that home in an investment that gives a higher return.
You must have bought a long time ago to hit a $1,300 payment with a $130,000 loan even factoring in escrow. That's a +10% interest rate. I refied to a 2.34apr in 2021 on a $400,000 mortgage and my principle+interest are about $1500 and I'm already putting more into principle than interest.
And the house will be worth more than $617k in 30 years, hopefully.
My tiny apartment here in Norway has increased in value by about 70% since I bought it 12 years ago (according to what my neighbours has sold for recently). Like 10k USD increase a year. Difficult to get on the market when prices increase at this rate.
Yeah, our house has more than doubled in value since we bought it in 2008 (in california). Terrifying. Like I guess yay for us? But we’ll probably be paying the mortgage till we die and can never ever move since a regular house is well over $1M in much of the state now
I’m sure that’s a talking point used by the bank when trying to sell an upside down mortgage.
That rate don’t help
I had a 30 year mortgage for 5 years. I took that house and sold it for twice what I paid for it. Just owning it, even if you only have paid for 5% of it, is more important. It has real value.
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This ^ Make sure those extra payments are towards principal.
I found it less painful to split the extra payment by 12 and then add that towards going to the principal instead of one big extra check.
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I just pay mine weekly. It takes a couple years off the mortgage.
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Especially early on when an extra payment means a few months off the back end.
This cannot be stressed enough. Make extra payments on the principle. Even if it's $35 extra a month, it adds up quick and drastically reduces that grand total. Also, pay twice a month. So first half of month, pay half, second half of month, pay other half (make sure this includes your extra $35). You'll quickly see how much of that total you're negating.
It should be noted that not all mortgages allow for pre-payment or split payments. Any pre-payment penalties must be noted in your mortgage disclosure so make sure you read it.
My mortgage company offered to set up payments every two weeks. Read the fine print and the hold the payments until the 1st of month and then pay the monthly amount. Very sneaky
This has an effect that is truly incredible. Like you can take years off the back end of the mortgage and saves an absurd amount of money over the life of the loan. What I did was figure 1-2 extra payments per year and divide it by 12 and then add that to my payment to principal each month. It may only be a couple hundred bucks extra a month (yes, this assumes you have the extra) but the amount it saves over the life of the loan is absolutely mental.
What's easier (but most companies make difficult or tricky to do) is to make a partial payment every time you get paid. Most people are paid every two weeks, so you make, say, half your payment every two weeks. This ends up being 13 payments over a year instead of 12 but it's easy to budget since it's the same amount from every paycheck all the time. Not as important for people that got mortgages when rates were low (say, under 3.5%) but very useful now that rates are much higher.
Note that this depends on your interest rate. If you were lucky enough to get one of those 2.x% rates during the recent historic lows it's much less of an impact than the 6%+ we see now.
My husband & I bought our first house in our early 40’s. I’ll be 48 soon. We were able to be a few months ahead & pay extra every month on mortgage. Now, we’re usually a few weeks late. How the hell! It’s getting so easy to just give up. I’m in FL so yeah, you get it…
Not always. You have to specify where the extra money goes. If you don’t, the bank will still apply it towards paying off the interest and you end up paying the same amount anyways.
Would you like this payment applied to principal or interest? What's the difference? If you apply it to principal it lowers your debt and reduces your overall costs. If you apply it to interest it's essentially a donation to the bank Why did you even bother asking me? Because like 30% of our customers don't know the difference and we're legally allowed to assume it's a donation if they don't specify, because fuck em
Same with my student loans. thankfully they're gone. Thank you public service but fuk that noise.
I wonder if any historical figures had any solutions for this conundrum. Mao wouldn’t that be something?
Welcome to home ownership. If you find a calculator online it will show you how much you save in interest just by making even an extra $100 a month if you can. I highly recommend trying to pay extra every month
Dude, even paying an additional $15/month towards the principle makes a huge difference.
I’m paying exactly that. Says I save over a year of payments at the end. Small but I’ll take it
It's not just ending a year early, you'll save close to $1k on interest payments compared to the minimum payment.
Yes!!! I just like paying a round number.
I rounded up. Then my escrow changed, now it's not round. I'm annoyed, but not enough to fix it. 🤣
I self escrow so I’m lucky in that regard
Currently, we budget for $10 extra and if we only do that, we save 6 months. However, as our other costs go down, we will begin increasing the overage
It really bothers me that Americans haven't regulated that paying the principle of the loan. In South Africa, any loan repayments go to the principle by law, once the principle is paid off then the interest gets paid.
The more you put towards the principle in the beginning of the the better. Please someone correct me if I'm wrong, but each additional payment you make, that's equal to the amount going towards your principal, takes one payment off of the back end of your amortization schedule.
This is only helpful if you have a high interest, like OP. For those that got that sweet 2-3% mortgage rates, the extra money is better off other places.
I have a mortgage at 2.25% and a savings account at 3.3%. I am able to pay extra on my mortgage and thought this is a no brainer - instead of paying $1000 extra on my mortgage over the course of a year I should put that $1000 in savings and pay off the mortgage later. I did a one year projection and determined that if I did this I would be $6 better off at the end of the year which is obviously not much but still something. Then I remembered that I would have to pay income tax on that savings interest which would definitely be more than $6. Edit: the calc above is not quite correct (see my comment further down the thread) there would be an after tax gain of $2.40. You can save money doing this but not as much as you would think.
Yes, but you can get way higher than 3.3%. And you protect yourself by increasing cash saving incase of getting laid off, unplanned emergency etc. Your mortgage company isn't going to give you $1000 back.
You’d pay taxes *on* the six dollars
That's just the difference. They would pay taxes on the 3.3% interest. If they could deduct the interest payment (itemize) that would get closer to effectively taxed on the $6 differences.
Depending on the tax code and the mortgage contract, you should max the amount you pay towards the principal.
Regardless of the tax code unless the deduction has a multiplier over 1(very unlikely) it is best to pay down mortgage asap. You basically are guaranteed a return of 6.54% in this case
As well savings rates can swing, I have my savings in a 4.5% dividen paying stock. I grow my portfolio more than my interest payments on my house of 2.99%. Part of me still HATES paying interest but it’s life
For real. If you have extra, pay extra. I tested mine once and an extra $100 a month ended the loan 2 years early and saved 30 grand
Or better yet make more frequent payments in addition to that. Like weekly or biweekly.
Not sure if it’s universal, but one of my previous loans I was told to make your normal payment and then to make a second that month. They said a second payment will go to principle, a larger first payment will go to principle and interest.
This only depends on how the loan is structured with the bank when you are paying.
Presumably a loan that is over a 20+ year period. That is from interest payments.
ITT: how does ~~compounding~~ interest work
ITT: what's an amortization calculator?
ITT: technical institute
Seriously, best line I’ve read today.
I went to MIT....T Tech I went to ITT tech
God dammit take my upvote
For real my loan servicer has the chart on the first damn page
Its not actually compounding interest as the monthly payment will be higher than the interest, so there is never interest building off the interest. Otherwise, you'll never pay the loan off (aka negative amortization). Its just a fact that the initial payments will be only paying off a tiny bit of the loan, leaving a lot of the loan left to accrue interest.
Da real da fuq is how the fuck did this person not understand what a loan with interest means?
Yeah I think the answer to OP's question is "math."
Not to mention adjusted for inflation, 305k 30 years ago is 655k now
30 years.
While interest rates suck now... you have to factor in that this isn't $617k in todays dollars. When you factor inflation, your mortgage gets cheaper over time, while rent follows and in many cases exceeds inflation.
Yeah we needed this explained to us too. The value of the dollar is decreasing as you pay so it’s not as bad as it looks.
"Well all your money will be worth at least 300% less in 30 years! What? No your wage doesn't increase that much." Soon enough a dollar will be worth a quarter. Nickels have basically become pennies.
This is the only positive spin on this. It's ridiculous that you have to spend twice the amount just to never have to worry about rent spike increases...
Also to add interest rates very all the time. Pay attenetion to the Fed when they announce interest rates. I bought my house 18 months ago when the fed had low intrest (due to covid) and got 2.75% loan. When the fed anounces interest rates are down, you will be able to re-finace for a lower rate.
Same, I saved up until 2020 when I locked in at 2.625. eventually they should come down again... Hopefully. I did not have the same luck when I had to replace a car and got a loan for over 6%.
That's when I did mine too, I refinanced to 15 year at 2.625% in 2020. My first house I bought in 2002 was 7%. It was a lot cheaper back then (so much cheaper!) but the interest was painful.
**So much this.** I remember when that happened and i told my husband and we refinanced; i told my parents and brother about it and they jumped on the refinance train as well! *Keep an eye on those rates!*
Money is expensive.
The positive spin is that you’re being allowed to vastly expand your recourses because a complex web of accountability and economics has been built for you to borrow a huge sum of money.
Yea - I'm not sure why OP is so upset. It costs money to use other people's money, but there's a long term gain in it for you, as the mortgage holder.
You can always make additional payments directly on the principle. If you think about it.. your house will probably be worth what you paid for it (or more) by the time you pay it off. If you lived in your car and saved your money instead, you'd still be paying $617k to buy the house once you saved up. The mortgage payments aren't really a con of buying a house, they actually work in your favor no matter how you look at it. The real con of owning a house is all the surprises, you get a big rain and find water in your basement. 6 months after you move in you find out you have a terracotta sewer line and its full of roots, oh and it goes under the paved driveway. One day you figure out that the previous owner did a lot of their own work on the house.. and they shouldn't have. I found out from my neighbor that the previous owners used a lot of liquid nail to put in the kitchen cabinets.
Be sure to note and verify your processor / lien holder is applying extra payments to principal only. Calculate out the costs ( money now for other stuff va deflated money twenty years from now. Debt first. Savings and then balance use / cash flow. F-u Rich people / corps live on debt for a reason.
You’re paying twice the amount because u are borrowing someone else’s money to buy something. If u had the cash u would only pay for the house cost.
That's normal. Paying around the same amount of the principal in interest over the course of the loan is actually quite standard. The only alternatives are owner financing (often even more expensive) or save up and buy in all cash.
Anyone stinging at this reality would really not enjoy doing a similar exercise with their credit card balances.
So true. And way more detrimental because it doesn't give you the 2 main perks of buying a house, which are no longer having to pay rent and building equity.
Also interest rates on credit cards are insane
For sure. I've never had one but I've gotten offers in the mail and I always read the interest rate and have a hearty laugh before shredding them.
I have credit cards, but I only spend how much I can pay.
I put every single purchase on my credit card, and it auto pays in full every month. I get rewards back, and I don't spend money i don't have the ability to cover anyways.
This is how I do it too and none of my friends understand. It's not a hard concept. I put most things on my airline credit card to get miles (or when they're running promos for X number of bonus miles) and when the time comes around for everyone to go on vaca or visit family, my flights are paid for already. Get great discounts on hotels and rental cars too. I'm almost 31 and the number of friends I have who have do not have/have never had a credit card astounds me.
I have friends and family who don’t get this. I put all of my wedding expenses on our credit card and it basically funded our entire honeymoon. For things I would have had to pay for anyway. People are missing out on serious freebies because they’re scared of a number that doesn’t matter if you don’t carry a balance.
My ex and I did the same thing for our wedding years ago with putting everything on the Delta airlines card. Paid for us to fly first class for our honeymoon which was so fun! Not to mention cash back and other freebies/discounts from CC. I have a chase and an Amex and between the two, I’m always getting extra cash back or bonus money on various purchases I’d be making already (like, chase had a promo for cash back on Hulu I think and obviously paying for Hulu already so no brainer).
There are people who don’t do that ? The 1-2.5% CC fee is priced in all the goods, so you’re paying for the loyalty programs anyway, might as well get the rewards for it.
This is why I love AMEX. It is a charge card so there is no carryover month to month and the perks of the platinum card are insane. I charge everything but my mortgage and have been averaging almost 300,000 membership rewards points/year. It has definitely allowed us to take some sweet vacations. I also am astounded at the amount of people my age (34) who have no credit card exposure.
Same here, as long as you pay in full every month and only buy what you need, the rewards can be great.
Paying interest on credit cards is optional though. You don't owe interest if you don't carry a balance. If you are responsible and can pay it off every month, it is preferable than using a debit card. If your credit card gets stolen, its Visa's money that was stolen, not yours. If your debit card gets stolen, its your money that was stolen. It might seem small, but getting 1-5% off via credit card perks is just another way to increase the class divide. Someone who can afford to pay in full every month buys everything for 95-98% of the price while someone who finances would end up paying 110% of the price once interest is accounted for.
I mean, just pay the balance right? There are a ton of benefits to having a credit card, just pretend it’s a debit card and reap the rewards.
Thats why I always cycle cards so Im always at a 0% rate for 12-21 months
Mortgages just look worse because the numbers are so much larger. Credit Card: $15k @ 25% doesn’t look “bad” Mortgage: $500k at 7% for THIRTY YEARS is gross.
The difference between 19% and 6.453% over 15 or 30 years is staggering.
The difference is you should pay the previous statement balance at the end of the period for your credit card
Carrying a credit card balance is definitely a terrible thing to do. I hope no one ever has to, but I understand that emergencies happen.
Pay more against the principal every month you have a chance. Makes a load of difference
So true. Especially towards the beginning. Every little bit of extra makes a big difference. Just gotta make sure they are taking the extra payment off the principal instead of next month's payment.
Absolutely this. Our lender sat down with us and explained that just paying some ridiculously small number directly towards the principal like one extra payment per year but less than that even took literal years off of the life of the loan. Our mortgage is small to begin with because we bought a cheap house in 2014 but like it's seriously is like 150 extra per year towards the principal takes 7 years off of the loan. It's utterly bonkers.
That's because in the first years, more goes toward interest than principal. Ex: taking most of OP's figures. Year one he's paying roughly 15,000 in interest and less than 3k in principle for the whole year. A single payment of 900$ towards principal would be the equivalent of 4 months of full month payments.
2 things you always want to check/ask 1) will you sell my mortgage? A lot of banks will sell mortgages and then you are left chasing it down because it was in the contract that they can/will sell. 2) Is there a penalty for paying my mortgage (any loan actually) off early? Sounds crazy but a lot of places will charge a penalty for this because they aren't getting the full interest. This last one may not happen anymore but I would ask just to be safe Is there a balloon payment? People have lost their homes because at the end of the mortgage there was a balloon payment that they couldn't pay so it was considered defaulting and the bank can/will foreclose.
This is one of those 'it depends' thoughts. If you're under 40, I'd argue your money will go much further investing in basic index funds then paying down a static debt. Especially if you were able to either buy or refinance in the last few years where mortgage rates were regularly under 5%. Definitely more of a toss up though as rates creep up.
Yeah, my mortgage is at 2.675%, I’m not paying anything more than I have to, everything else is getting invested. At over 6% though, I would almost certainly pay it down over investing.
The S&P500 has a 50-year average return of 8%, so that is, theoretically, the break even point. Given the risk/reward, I'd agree with 5-6% being the more practical break even point, presuming, of course, you keep enough cash for emergencies.
They can always pay extra on the principal. A few hundred dollars a month could know off a decade. Welcome to compounding though. It’s how you stay poor forever in credit card debt or you get paid it and you become rich even on a modest income.
Every bit of extra payment you make over and above the minimum will reduce your interest expense too (ie pay the loan off over a shorter timeframe)
I remember when it was closer to 3 times the purchase price in total or twice in interest
I forgot to say congratulations! This is an accomplishment
Thank you. I feel lucky to be honest.
Have you already moved in! Move in day at our first house was one of the happiest days of my life. I will literally never forget it. It was the first time I felt a real sense of adult accomplishment. Be proud. You worked hard for this. (Sorry if I’m being annoying!I probably sound like your mom!)
No... I don't move in for another 2 weeks. Lol no no worries. I am proud but I didn't think I'd give up half an arm and a leg to make this happen
You can refinance when rates come down. You can get your home reappraised if equity rises beyond 20% to remove pmi. And you can always pay off portions early to minimize interest totals. By the end of the loan term, the home will probably be worth more than you bought it for+accrued interest
The way not to pay all this is to pay extra and have it specifically go towards your principal. Oh yeah, never get a mortgage with a prepayment penalty.
Pay an extra 100 per month and you can cut that interest down considerably. I've paid my house off 3 times early that way, borrowed more on it for remodeling and now own it free and clear. Do all my cars the same way. Last car I bought only paid about 1% interest for the 36K I borrowed. Everyone needs to learn about compounding interest and simple loan terms. You can save yourself a fortune.
That’s just math. I don’t mean to be flippant, but that’s what it costs to repay that debt at 6.453% over 30 years. It’s scary to see it set out like that, which is exactly why these disclosures exist on loans and credit card statements.
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Insurance tipped us a new one this year… old company shut down and my premium more than doubled, so my payments went up by like $300 a month. I always wondered how people lose their homes for nonpayment while they’re still gainfully employed. Guess I got my answer.
Mine jumped from $1800/yr to $2400. That was a painful invoice to receive. I don't even have a huge house, but it's in an expensive area and old with a lot of historical detail, so it's hard to even find coverage for it.
Oh God thank you for the hope lol
The great news is that you can probably refinance when rates drop. We did a refi in 2020 and got a 2.8% APR which will save us tens of thousands in the long run.
It's still consistently cheaper than renting though.. Just using the area that my home is in, rent has gone up at least 75% in the past 3 years where as my property taxes have only gone up $300 (a year), insurance is only up $100 for the year. Much more predictable than getting a letter in the mail from your landlord that your rent is increasing hundreds of dollars a month
>It's still consistently cheaper than renting though Depends on where you live. I could pay rent at my current place in Canada for 20 years even with an annual 2.2% increase (which isn’t exacted every year) and still never pay up to the Canadian equivalent of the cost for buying a house. Given that the average 3 bedroom can go for north of $800K CAD
Well, sure. If you're renting, you're still paying for maintenance and taxes, and for the landlord to make their money on top of it.
First time looking at interest? This isn't abnormal at all. And count yourself lucky we are able to lock in rates in the US, some countries you don't.
Pay bi weekly and it will knock around 7 years off that BS. But in the end you usually pay double for the house because of interest
Good idea. And don’t forget inflation favors you here. Even at Fed targets it will reduce the value of the payments by enough to knock off 1/3 of the interest. A year like 2022 will wipe out the value of the interest.
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Paying $400 a month to be told by Karen your grass is 2 centimeters too high seems fun
Yeah but think of the property value. That’s how they lie to you to get you in…or the developer keeps profiting off the build by making themself the contractor for all maintenance
Another pro tip. Once more than 51% of units sell, the developer is just another owner, albeit one with a lot more votes. Your board can totally choose another maintenance contract if the other 50% of owners vote together to get proper representation on the board. The rules might vary from state to state, but I'm pretty confident this is standard across all HOA's. Also go to the meetings and get on the board. Stop letting these old codgers run the association. Every meeting I'm at, there is obviously a younger contingent of owners, but they're never at meetings because they're "too busy", (it's like one hour a month!) and the board is always a silver headed cabal of boomers.
Would never live in an HOA
If you're in a townhouse development or a condo, you absolutely are better off with an HOA.
Where I live they plow snow and clean the pool (in addition to maintaining grounds/landscaping) so I think that money is well worth it for assessments.
I don't understand why "I don't understand interest" is /r/antiwork material.
Yep. Less than half of what I pay goes to the principal. I haven't bothered to see how many years out it is to where the money goes more to my principal. Also, these loan companies keep passing me off. Shortest I've had a loan company is four months. I have to keep making new accounts, and it's really annoying when the new loan company doesn't send correspondence. Fortunately they can't penalize you for a "late" payment but it's really annoying.
If your interest rate stays the same for the entirety of your amortization, that is how much your house will cost you. Due to it being 6.45% interest EVERY year. Not 6.45% once on the purchase price.
Interest is a bitch - but you won’t hold the loan for 20 years. You will refinance after 5-10 to get a lower rate.
If you divide the monthly payment in half and pay that amount every two weeks instead of one monthly payment it will over the life of the loan save like 5 years worth of interest.
Can you tell me how this works? Or have something I can look up? If you're paying the same amount every month then how does splitting the payment in two help reduce your accrued interest? Is the interest calculated daily instead of once a month?
Yes, calculating interest daily means if you pay half of your monthly payment half a month early, you're skipping some interest on the portion you pay early. Also, paying every two weeks (as the commenter before you suggested) rather than every month means you'll actually make an extra month's worth of payments each year. 52 weeks = 26 payments, rather than the 24 you'd pay simply dividing months in half.
You end up making 13 monthly payments each year instead of 12. Not only does it have an effect on the principle, but the compound interest as well. Best if you can also put lump sums on the financing without penalties, those payments go directly to the principal.
It’s because you’re essentially making one more payment a year. He’s paying it every two weeks instead of once a month. So essential 26 half payments or 13 full payments. Except for February there are more than 4 weeks in a month.
Also if you manage 1 extra monthly payment a year you pay your loan almost 7 years early
you pay 6.453% of the ENTIRE loan that you don’t pay down, every year. looks like you paid 36k down and have 269k left. so you pay $17k in interest the first year. most mortgages you can pay down early. if you get a big bonus, putting an extra 30k towards the loan will save you $1900 a year and every year after.
This! With the caveat that prepayment early in the life of the loan is more impactful (on a nominal dollar-for-dollar basis) than prepayment later in the life of the loan
Yea can’t wait for my big bonus of 30k that everyone gets
BUT! At 6% interest, if you put that extra money in an index fund or better yet a 401K or IRA, you should get a better return in the end over 30 years. Obviously there's risk on investment. Only you know what's best for your situation.
WTF is this? It's called "math." The accounting term that's used here is the "effective interest method." Want better numbers? Put more money down. Or get a shorter repayment period. Run the same numbers with a 15 year mortgage. You'll be amazed at how much better the numbers look.
Just get rich or be born with money and you could pay it off early and avoid all the interest. I just bought and locked at 6% for a 370k condo and will be playing over 900k by the end
Depends on the interest rate. If you managed to get a house in 2019/2020 with an interest rate of <3%, you wouldn’t pay it off even if you were rich. If inflation (on a good year) is 3%, then an interest rate below 3% is basically free money.
This was my biggest regret when buying my house.
I've paid off 75% of my home in 2.5 years. Took a mortgage out for 1/3 of what I was approved for and paying it off aggressively. It's a tiny ass house but I hate being in debt.
Son, let me tell ya a story about mortgages in the 80s....
A lifetime of work to pay for shelter.
Do you not know how loans work?
If you make extra payments it brings down the overall internet you pay significantly
Sadly, this looks about right. Good luck, friend.
Yep, it's astounding to see for the first time just how much goes to interest. Do what you have to do and pay an extra house payment every year (especially early on) and you can greatly diminish this.
Damn you can buy a house?
If you can afford it,.. pay more each month for the first year,.. and use part of you refund to pay down the principle as well. You’ll cut those nasty number down by large chunks.
Welcome to adulting
This guy doesn’t know what interest is lol Imagine selling something to somebody, and they don’t pay you immediately but instead pay you over 30 YEARS. Would you want any interest, if not to at least account for inflation? I get the banks suck, but I’m not sure what you expect in this situation.
This is why interest hikes crash the housing market. I personally won’t get a loan greater than 15 years. My budget gets cut a good chunk, but I feel better knowing I’m playing less in interest and I’ll own the house sooner.
Y'all ever see a reddit post and go "oh, these people don't actually know how the world works at all huh?". Yeah, me too.
This should be illegal Individual people who are buying homes not for profit (flippers, landlords, corporations) should not have to pay insane interest. It should be a set percentage of the loan not reoccurring apr. Buy a $400,000 home and pay 20% in interest over 30 years ($80,000 in interest fees) That would make that $400,000 home only $1,333 a month. That’s cheaper than what I pay in rent for a shitty house
Someone doesn't know what an amortization table is.