I had a conversation with a colleague yesterday who was surprised to find that his mortgage payment was the same as when he bought the house 20 years ago. When he bought the house, he paid $190,000 and his interest rate was 11.25%. He now carried an $800,000 mortgage and the payments were the same with his mortgage interest running at 2.75% (prime plus a half). Not addressing the fact that he ran up his mortgage, I decided to test his theory on my house.
We moved into our house in 1993 and paid $318,000. The interest rate was about 7.25%. If we had put down 25% (I don’t feel like hunting for my original mortgage documents—cobwebs are creepy), our mortgage payment would have been about $1707.
My house is now worth about $490,000. If I again put 25% down (I’d have to save a little bit longer), my mortgage payment would be $1923 with the current posted rate of 3.95%. That rate is for a fixed mortgage with a 5 year term. There are several other options that I can now take that would bring my mortgage payment down.
What does this mean to you?
You might not be in the market for a $500,000 home (if you are, we can talk), but consider that my 2600 square foot house would rent for upwards of $2500. I can buy it for less.
Maybe you are looking for a $350,000 house. Check my mortgage calculator to find out how easy it is to afford more home. Moving up or moving out is a very attractive option right now.