4 ms·

First of all, a $1M house with $200k down means an $800k mortgage, not a $1M mortgage. With rates as ridiculously low as they are, monthly payments are closer t

First of all, a $1M house with $200k down means an $800k mortgage, not a $1M mortgage. With rates as ridiculously low as they are, monthly payments are closer to $3.5k/mo. Add in an amortized $500/mo in property tax and you're at $4k/mo, for about 39% of income, not 48%. For that married couple making median income (filing jointly), after the mortgage interest tax deduction I think it's like 46% of their after-tax takehome pay. They'd have about $4.8k/mo ($57k/year) left over for whatever. That doesn't seem like so much of a strain as to be inaccessible. (I used some crappy googled income tax calculators, so it'll be off, but hopefully not by a ton. I only factored in mortgage interest deductions, and I don't understand SALT deductions and didn't factor that in, so they might be able to deduct more and have even more left over?) (We're also both using the 2018 median household income, which is like $8k more than 2017, so 2019 was probably even more. Who knows how that relates to today's chaos)

ipython 7y ago
Your numbers are way off - dangerously so. First, nobody is getting a sub-3% fixed 30 year mortgage right now - so your minimum for principal+interest on your 800k loan is already $3656 (assuming you can get 3% - every half% is going to cost you roughly another $350 per month) Next, your estimate for property taxes is similarly low. I don’t live in CA but where I live taxes are roughly 1% of the assessed value. Let’s say the county assesses your 1m home for 900k - and not to mention the assessment will probably increase over time - so you’re looking at about $750/mo there. You totally forgot about homeowners insurance - required for that loan plus it’s included in the front end dti ratio. That will set you back another ~$150 per month. That adds up to a total of $4556, almost 14% higher than your estimate and representing one trip to Disney world’s worth of extra spending over the year. Often overlooked is the savings you should make for maintenance, repairs, and improvements. Only after buying and selling a few houses do I finally appreciate exactly how expensive they are and how “only” a $100 per month difference adds up - quickly.
- 6gvONxR4sf7o 7y ago
  Looking at three different calculators from googling "mortgage calculator," I get an $800k loan at 3.25% (higher than the rate I pay on mine in SF, but I paid the rate way down) coming to $3,482/mo for principal and interest. For property tax, i found this california property tax calculator [0], which says it's $6,490/year ($541/month) for a home assessed at $1M in SF. That brings us to $4023/mo. You're right I totally forgot about insurance. Oops. Sure let's use $150/mo, but IIRC that's more than I pay on mine. Maybe because I'm in a big building and the HOA has insurance for parts that I'd need to insure if it were a single family home? But I didn't factor in HOA, so $150's fair, even cheap. $3482+$541+$150 = $4173/mo. I still think this median household is going to have something like $4-5k/mo left over after principal, interest, property tax, insurance, and income tax. That's the most important number to get right in terms of how accessible this is. It tells us how much to they have to squeeze on everything else to make it work. [1] https://smartasset.com/taxes/california-property-tax-calculator#95nyLOqSYQ https://smartasset.com/taxes/california-property-tax-calcula... ... also "$4556... representing one trip to Disney world’s worth of extra spending over the year." Holy shit really? I never would have guessed disney world is that expensive. Daaaaamn. Guess I'm never going there :( (on second thought, I think you're right about the property tax estimate being low. I pay more than the online calculator said and my place is assessed below $1M. Maybe it's all the other stuff tacked on in SF? Add maybe ~$200/mo to my above estimate, we're still talking about something like $4k/mo left over)
  - nickv 7y ago
    That site is completely wrong about property taxes in California. The property tax is 1% plus a county and city level supplemental. For example, my property tax in Oakland is 1.3688%. I have no idea how that SmartAsset got that rate. Literally it makes no sense and is comically wrong.
  - mackey 7y ago
    https://sftreasurer.org/property/understanding-property-tax https://sftreasurer.org/property/understanding-property-tax San Fransisco is 1.1801%, so 11,801 on a million dollar house.
  - ipython 7y ago

ipython 7y ago

Your numbers are way off - dangerously so. First, nobody is getting a sub-3% fixed 30 year mortgage right now - so your minimum for principal+interest on your 800k loan is already $3656 (assuming you can get 3% - every half% is going to cost you roughly another $350 per month) Next, your estimate for property taxes is similarly low. I don’t live in CA but where I live taxes are roughly 1% of the assessed value. Let’s say the county assesses your 1m home for 900k - and not to mention the assessment will probably increase over time - so you’re looking at about $750/mo there. You totally forgot about homeowners insurance - required for that loan plus it’s included in the front end dti ratio. That will set you back another ~$150 per month. That adds up to a total of $4556, almost 14% higher than your estimate and representing one trip to Disney world’s worth of extra spending over the year. Often overlooked is the savings you should make for maintenance, repairs, and improvements. Only after buying and selling a few houses do I finally appreciate exactly how expensive they are and how “only” a $100 per month difference adds up - quickly.

6gvONxR4sf7o 7y ago
Looking at three different calculators from googling "mortgage calculator," I get an $800k loan at 3.25% (higher than the rate I pay on mine in SF, but I paid the rate way down) coming to $3,482/mo for principal and interest. For property tax, i found this california property tax calculator [0], which says it's $6,490/year ($541/month) for a home assessed at $1M in SF. That brings us to $4023/mo. You're right I totally forgot about insurance. Oops. Sure let's use $150/mo, but IIRC that's more than I pay on mine. Maybe because I'm in a big building and the HOA has insurance for parts that I'd need to insure if it were a single family home? But I didn't factor in HOA, so $150's fair, even cheap. $3482+$541+$150 = $4173/mo. I still think this median household is going to have something like $4-5k/mo left over after principal, interest, property tax, insurance, and income tax. That's the most important number to get right in terms of how accessible this is. It tells us how much to they have to squeeze on everything else to make it work. [1] https://smartasset.com/taxes/california-property-tax-calculator#95nyLOqSYQ https://smartasset.com/taxes/california-property-tax-calcula... ... also "$4556... representing one trip to Disney world’s worth of extra spending over the year." Holy shit really? I never would have guessed disney world is that expensive. Daaaaamn. Guess I'm never going there :( (on second thought, I think you're right about the property tax estimate being low. I pay more than the online calculator said and my place is assessed below $1M. Maybe it's all the other stuff tacked on in SF? Add maybe ~$200/mo to my above estimate, we're still talking about something like $4k/mo left over)
- nickv 7y ago
  That site is completely wrong about property taxes in California. The property tax is 1% plus a county and city level supplemental. For example, my property tax in Oakland is 1.3688%. I have no idea how that SmartAsset got that rate. Literally it makes no sense and is comically wrong.
- mackey 7y ago
  https://sftreasurer.org/property/understanding-property-tax https://sftreasurer.org/property/understanding-property-tax San Fransisco is 1.1801%, so 11,801 on a million dollar house.
- ipython 7y ago