5 ms·
The sleight of hand here is presenting the breakdown in the first years of a mortgage, when the interest payment is at it's highest, as though it's representati
by simonh 5y ago
The sleight of hand here is presenting the breakdown in the first years of a mortgage, when the interest payment is at it's highest, as though it's representative of the mortgage as a whole.
Suppose I presented the analysis based on the last year of a mortgage. The interest payment would be almost nothing, with most of that swinging over into the payment on the principal. Presenting that as being representative of mortgage economics would be grossly misleading, and so is this.
The other thing to bear in mind is that mortgage payments, including interest, can be half as much as the rent on a similar property. That's certainly the case in my area. Even factoring in tax and insurance it's often significantly cheaper to pay a mortgage than to pay rent, quite apart from the wealth building argument.
- shapefrog 5y ago> The other thing to bear in mind is that mortgage payments, including interest, can be half as much as the rent on a similar property. It can also be twice as much. It can also be the same amount. It can be anywhere between negative a lot & positive a lot. The point is to do the maths and not just parrot the bullshit line 'renting is wasting money' because it may or may not be true.
- simonh 5y agoYes, absolutely and I don’t think I’m parroting any line. I’ve rented before and it can be the best option depending on your circumstances.
- aswan 5y agoIn addition to the proportion of interest decreasing over time as the principal is paid down, there's an additional factor: the mortgage payment is fixed for the full term of the loan at purchase time. So suppose you take out a 30 year mortgage with a monthly payment of $2000 in 2021 and you never pre-pay or refinance. In 2050, you'll still be paying $2000 per month even though rents will have risen with inflation over that time.