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In 1985, the average 30 year mortgage interest rate was 13.5%. A $150k house paid off exactly on time would have cost $618k total. This would also be a 41% de
by linuxftw 5y ago
In 1985, the average 30 year mortgage interest rate was 13.5%. A $150k house paid off exactly on time would have cost $618k total. This would also be a 41% debt to income ratio for a $50k income.
A $500k house today with a 30 year mortgage at 2.5% paid off on time will have paid $711k total. With only a $75k salary, this would be a 31% DTI.
Granted, taxes an insurance are going to be more now than they were then, but housing doesn't seem significantly more expensive.
- endisneigh 5y agodoesn't seem like a great comparison as you can refinance.
- SmellTheGlove 5y agoIn 1985 you weren't going to refinance to 2.5%. It's a valid comparison at two points in time, I think.
- endisneigh 5y agothe point is that even after just 10 years you could've changed your interest rate to be just a third. If you take the lowest possible interest rates for each year in the 30 year period it would be much closer to the rate now than the rate then.
- jjav 5y ago> > In 1985, the average 30 year mortgage interest rate was 13.5%. > the point is that even after just 10 years you could've changed your interest rate to be just a third. That is not true. A third of 13.5% would be 4.5%. Mortgage interest didn't dip to those levels until around 2011-2012, by the time that 1985 mortgage would've just about paid off. Ten years after 1985 interest was still around 7.8% OP makes a great point in that one can't compare the price of a home from the past without looking at what the monthly payment would've been given the (often very high) interest rates of the time.