4 ms·

Instinctively I know I must have misread or misunderstood something, but... "$4000 a month is about twice the amount it takes to pay for my entire family’s liv

by alan_cx 14y ago

Instinctively I know I must have misread or misunderstood something, but... "$4000 a month is about twice the amount it takes to pay for my entire family’s living expenses. It’s also enough to pay the mortgage on a $900,000 house, " How does $48000pa pay for a $900,000 mortgage? Old skool was 3x your income. Pre-crash, 5x was possible. This is 20x (ish). What blindingly obvious point have I missed?

Someone 14y ago
This: You are using the "what should my income be for banks to give me a mortgage" figure, not the "what does a mortgage cost" figure. At 5% interest, a mortgage on $900,000 costs $45,0000 a year on interest.
- alan_cx 14y ago
  + 36k to pay the actual loan?
  - Someone 14y ago
    That depends on the type of mortgage. At least in some countries, you can/could get a mortgage where you do not pay anything back, the idea being that increasing house prices and inflation would, together, lead to a situation where total mortgage debt is much larger than the worth of one's house.
    - Someone 14y ago
      Oops: "larger" should, of course, read "smaller".
- ssanders82 14y ago
  I don't think he's talking about an interest-only loan. A $900,000 30-year mortgage with a 3.5% interest rate will cost $4,041 per month.
facemelt 14y ago
You could maybe come close to just paying the mortgage. But you couldn't eat, have kids, cable etc. For example: http://www.zillow.com/homedetails/101-Far-Brook-Dr-Short-Hills-NJ-07078/38679074_zpid/ http://www.zillow.com/homedetails/101-Far-Brook-Dr-Short-Hil... Taxes are high on this one, but in most places you're going to pay a lot of taxes on a 900k house. You are on the money with 3x income being what you can realistically spend on a house without getting yourself in trouble. A later poster says this is a mistake because it's what banks use, not what you can afford, but the banks historically used that number because it is what a person can reasonably afford. Way back when banks actually had to eat a loss on a bad loan, they knew who to loan to.
- akgerber 14y ago
  That amount of money would pay the mortgage (and nothing else) on a 30-year loan on a $900,000 house in the place where he lives, given a 20% down payment: http://www.zillow.com/homedetails/2012-Coralbells-Ct-Longmont-CO-80503/67092003_zpid/ http://www.zillow.com/homedetails/2012-Coralbells-Ct-Longmon... It wouldn't pay for anything else. He's just giving it as an example of what that amount of money can buy.
  - facemelt 14y ago
    It is the usual misleading puffery that was popularized by books like the four hour workweek.

by alan_cx 14y ago

Someone 14y ago

This: You are using the "what should my income be for banks to give me a mortgage" figure, not the "what does a mortgage cost" figure. At 5% interest, a mortgage on $900,000 costs $45,0000 a year on interest.

alan_cx 14y ago
+ 36k to pay the actual loan?
- Someone 14y ago
  That depends on the type of mortgage. At least in some countries, you can/could get a mortgage where you do not pay anything back, the idea being that increasing house prices and inflation would, together, lead to a situation where total mortgage debt is much larger than the worth of one's house.
  - Someone 14y ago
    Oops: "larger" should, of course, read "smaller".
ssanders82 14y ago
I don't think he's talking about an interest-only loan. A $900,000 30-year mortgage with a 3.5% interest rate will cost $4,041 per month.

facemelt 14y ago

You could maybe come close to just paying the mortgage. But you couldn't eat, have kids, cable etc. For example: http://www.zillow.com/homedetails/101-Far-Brook-Dr-Short-Hills-NJ-07078/38679074_zpid/ http://www.zillow.com/homedetails/101-Far-Brook-Dr-Short-Hil... Taxes are high on this one, but in most places you're going to pay a lot of taxes on a 900k house. You are on the money with 3x income being what you can realistically spend on a house without getting yourself in trouble. A later poster says this is a mistake because it's what banks use, not what you can afford, but the banks historically used that number because it is what a person can reasonably afford. Way back when banks actually had to eat a loss on a bad loan, they knew who to loan to.

akgerber 14y ago
That amount of money would pay the mortgage (and nothing else) on a 30-year loan on a $900,000 house in the place where he lives, given a 20% down payment: http://www.zillow.com/homedetails/2012-Coralbells-Ct-Longmont-CO-80503/67092003_zpid/ http://www.zillow.com/homedetails/2012-Coralbells-Ct-Longmon... It wouldn't pay for anything else. He's just giving it as an example of what that amount of money can buy.
- facemelt 14y ago
  It is the usual misleading puffery that was popularized by books like the four hour workweek.