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> on a $312,000 loan at 6.85% interest, the monthly payments were $2,044 for 30 years and $1,904 for 40 years. Whoop-de-do. A whole $100. > experts said it ca

> on a $312,000 loan at 6.85% interest, the monthly payments were $2,044 for 30 years and $1,904 for 40 years. Whoop-de-do. A whole $100. > experts said it can make a difference, especially since many homeowners hardly stay in one house for 30 or 40 years. > it's great because it saves them from wasting money on rent," > The extra 10 years also added more interest, close to $170,000 more Yeah, they're saving money on rent alright. Although I would argue at that point, a mortgage is just like rent since they won't be making any dent in the equity in the first several years or so before they might move again, except that it's a locked-in amount and can't be raised every year by the landlord... although taxes can be raised, and so you don't really own the land, in which case the government is your landlord at that point.

photonbeam 4y ago
A government landlord isnt telling you not to put nails in walls or preventing you installing aircon though
- rationalist 4y ago
  Granted this is a bit oversimplified... Do you think that's a fair trade-off? Pay a lot of money every year to keep something you bought, under threat of eviction and/or jail, just so you can hammer some nails into the wall? I'm all for paying for my share of external benefits derived from taxes, but is it fair to people who get priced out of their own homes due to gentrification or being bullied into it by the masses? (Strangers that they don't agree with voting for taxes.) I suppose I'm more interested in consumption taxes than taxes for just existing.
pfranz 4y ago
You're right about not getting much equity (unless the market keeps going up!) The videos says, "Hardly anybody stays in a house 30-40 years anymore. In fact, the average is 7 years before sell and move on." After 7 years you would pay about the same in interest, but close to 50% less towards the principle.
- tzs 4y ago
  You can still build considerable equity even if you are moving every few years, even if prices and interest rates are steady. For example lets say you buy a house for $250k and pay $50k down, taking a 30 year 6% mortgage. Your monthly payment would be $1199.10. Then you move in 5 years, selling the house for $250k and buying a new house for $250k. At that time you still owe $186k on your mortgage and have paid $59k interest. You are left with $64k net after paying off the mortgage, and use that as a down payment on the new house. You take out a $186k 30 year mortgage at 6%. Your monthly payment on the new mortgage is $1115.81. But instead of paying that, continue to pay $1199.10, the payment on your original $200k mortgage. That extra ~$75/month goes toward principle. Move again in 5 years, again selling for $250k and buying for $250k. You owe $167k, so net $83k which goes to the down payment on the new house. So this time you take out a $167k 30 year 6% loan. The payment would be $1001.25, but keep paying $1199.10. Say you keep moving every 5 years and keep selling for $250k and buying for $250k, putting the net after each sale into the down payment for the next house, taking a 30 year 6% loan, and making monthly payments of $1199.10. 30 years after you bought the first house as you come to the end of 5 years in house #6 you will have just paid off mortgage #6 and so you end up in a fully paid off home 30 years after you started just like you would have had you stayed in the original house for 30 years. You've also paid the same total in principle and interest that you would have if you had stayed put.
  - candiodari 4y ago
    I wonder. Given that the market is sooooo sure that house prices only go up, how much is insurance for that? What does a guarantee that I can sell my house in 10 years for the current price cost? Or how about a guarantee that the mortgage is fully paid off if the house is sold, even if the sale price is below the remaining principle? If that were, say, another $100 per month, while guaranteeing no loss in equity for me, that could be worth it.
  - flandish 4y ago
    With markets rising, inflation, and pay not matching, what you get for that 250k is less and less each 5 year jump.
  - 4y ago
jutrewag 4y ago
What I really don’t agree with regarding the payment structures is why mortgage companies are allowed to frontload the interest payments. Currently for the first 5 years of a 30 year mortgage, you’re only paying the interest with no payment going towards the principal.
- rzimmerman 4y ago
  I don’t think I’ve ever seen a mortgage that’s interest-only for a fixed time like that (but I’m not sure - I’m in the US). If you want fixed payments for 30 years the only way that works is if you pay less principal at the start. There’s more outstanding debt with the same interest rate, so the interest is larger.
  - CraigRo 4y ago
    They exist. I have a 10/1 io, at which point it becomes a 20 year amortization with a floating rate. The bet was that inflation would eat the principal down and I probably wouldn't be in the house more than 10-12 years anyway
    - rzimmerman 4y ago
      That's really interesting - so your payments are only fixed for 10 years (and at a lower amount, since it's interest-only)? I suppose you're betting that either: - You'll sell the house before 10 years - Rates will go down and you can refinance I'm in a more standard 10/1 ARM for similar reasons - the interest rate was lower and I felt it was a reasonable bet that we'd be able to refinance for a better rate (or worst case slightly worse rate) in the next 10 years.
      - CraigRo 4y ago
        Nope. I wanted maximum interest rate duration and I'm betting that inflation will be higher than my mortgage interest rate, so it will eat more of the outstanding balance. Adjusted for inflation, my balance will be less than half what it is now. I don't anticipate staying more than about 15 years, and the capped rate is low enough that in the worst case this is still reasonable, and I'll have greater optionality to refi if I have a bigger balance

photonbeam 4y ago

A government landlord isnt telling you not to put nails in walls or preventing you installing aircon though

rationalist 4y ago
Granted this is a bit oversimplified... Do you think that's a fair trade-off? Pay a lot of money every year to keep something you bought, under threat of eviction and/or jail, just so you can hammer some nails into the wall? I'm all for paying for my share of external benefits derived from taxes, but is it fair to people who get priced out of their own homes due to gentrification or being bullied into it by the masses? (Strangers that they don't agree with voting for taxes.) I suppose I'm more interested in consumption taxes than taxes for just existing.

pfranz 4y ago

You're right about not getting much equity (unless the market keeps going up!) The videos says, "Hardly anybody stays in a house 30-40 years anymore. In fact, the average is 7 years before sell and move on." After 7 years you would pay about the same in interest, but close to 50% less towards the principle.

tzs 4y ago
You can still build considerable equity even if you are moving every few years, even if prices and interest rates are steady. For example lets say you buy a house for $250k and pay $50k down, taking a 30 year 6% mortgage. Your monthly payment would be $1199.10. Then you move in 5 years, selling the house for $250k and buying a new house for $250k. At that time you still owe $186k on your mortgage and have paid $59k interest. You are left with $64k net after paying off the mortgage, and use that as a down payment on the new house. You take out a $186k 30 year mortgage at 6%. Your monthly payment on the new mortgage is $1115.81. But instead of paying that, continue to pay $1199.10, the payment on your original $200k mortgage. That extra ~$75/month goes toward principle. Move again in 5 years, again selling for $250k and buying for $250k. You owe $167k, so net $83k which goes to the down payment on the new house. So this time you take out a $167k 30 year 6% loan. The payment would be $1001.25, but keep paying $1199.10. Say you keep moving every 5 years and keep selling for $250k and buying for $250k, putting the net after each sale into the down payment for the next house, taking a 30 year 6% loan, and making monthly payments of $1199.10. 30 years after you bought the first house as you come to the end of 5 years in house #6 you will have just paid off mortgage #6 and so you end up in a fully paid off home 30 years after you started just like you would have had you stayed in the original house for 30 years. You've also paid the same total in principle and interest that you would have if you had stayed put.
- candiodari 4y ago
  I wonder. Given that the market is sooooo sure that house prices only go up, how much is insurance for that? What does a guarantee that I can sell my house in 10 years for the current price cost? Or how about a guarantee that the mortgage is fully paid off if the house is sold, even if the sale price is below the remaining principle? If that were, say, another $100 per month, while guaranteeing no loss in equity for me, that could be worth it.
- flandish 4y ago
  With markets rising, inflation, and pay not matching, what you get for that 250k is less and less each 5 year jump.
- 4y ago

jutrewag 4y ago

What I really don’t agree with regarding the payment structures is why mortgage companies are allowed to frontload the interest payments. Currently for the first 5 years of a 30 year mortgage, you’re only paying the interest with no payment going towards the principal.

rzimmerman 4y ago
I don’t think I’ve ever seen a mortgage that’s interest-only for a fixed time like that (but I’m not sure - I’m in the US). If you want fixed payments for 30 years the only way that works is if you pay less principal at the start. There’s more outstanding debt with the same interest rate, so the interest is larger.
- CraigRo 4y ago
  They exist. I have a 10/1 io, at which point it becomes a 20 year amortization with a floating rate. The bet was that inflation would eat the principal down and I probably wouldn't be in the house more than 10-12 years anyway
  - rzimmerman 4y ago
    That's really interesting - so your payments are only fixed for 10 years (and at a lower amount, since it's interest-only)? I suppose you're betting that either: - You'll sell the house before 10 years - Rates will go down and you can refinance I'm in a more standard 10/1 ARM for similar reasons - the interest rate was lower and I felt it was a reasonable bet that we'd be able to refinance for a better rate (or worst case slightly worse rate) in the next 10 years.
    - CraigRo 4y ago
      Nope. I wanted maximum interest rate duration and I'm betting that inflation will be higher than my mortgage interest rate, so it will eat more of the outstanding balance. Adjusted for inflation, my balance will be less than half what it is now. I don't anticipate staying more than about 15 years, and the capped rate is low enough that in the worst case this is still reasonable, and I'll have greater optionality to refi if I have a bigger balance