- My Forums
- Tiger Rant
- LSU Recruiting
- SEC Rant
- Saints Talk
- Pelicans Talk
- More Sports Board
- Fantasy Sports
- Golf Board
- Soccer Board
- O-T Lounge
- Tech Board
- Home/Garden Board
- Outdoor Board
- Health/Fitness Board
- Movie/TV Board
- Book Board
- Music Board
- Political Talk
- Money Talk
- Fark Board
- Gaming Board
- Travel Board
- Food/Drink Board
- Ticket Exchange
- TD Help Board
Customize My Forums- View All Forums
- Show Left Links
- Topic Sort Options
- Trending Topics
- Recent Topics
- Active Topics
Started By
Message
re: 1st mortage, is 4.5 a good rate on 30 yrs?
Posted on 4/2/14 at 11:18 am to ItNeverRains
Posted on 4/2/14 at 11:18 am to ItNeverRains
These mortgage rates are great, but the only real way to get a good deal on a house is to pay down the mortgage much quicker than 30 years.
I spend most of my time in New Orleans, this part varies by locale but here is my example.
I would argue anyone who tells me a house in New Orleans is a good investment is a moron. The total ownership cost of a house in New Orleans is a terrible investment. I did the math on the house that I rent part of when it sold recently. I also did similar calculations on condos I could purchase that are comparable to my rental. Here is a breakdown of my example house: When I say approx that means rounded number not a guess.
Sold for approx $1.7 million
Prop Taxes: approx $24,000/yr
Insurance: approx $28,000/yr plus windstorm risk exposure approx $100,000 (deductable)
Interest cost assuming 30yr and 20% down
$977,425.29
Taxes and Insurance assuming no tax inflation or premium inflation (obviously over conservative)
$1,560,000
So you're looking at a cost not including your principal investment ( $1.7 million) or maintenance/utilities/capital improvements of nearly $2.6 million. Add your principal and you get about $4.23 million in 30 yr costs. Remember now we simplified, taxes would go up, insurance would go up, often by a bigger number than inflation.
If home prices continue to rise by an average of 3.4% annually over the 30 years your house will be worth $4.6 million with a minimum outlay of $4.23 million. Once you add in maintenance/tax+insurance inflation/loss risk due to poor insurability it really is a terrible investment.
The 8% difference in projected value over costs won't even come close to covering upkeep costs, let alone make the downside risk tolerable.
When I looked at the numbers on 1-2 bedroom high end condos the numbers were actually even worse due to comparable rentals being so affordable.
Bottom line: Look at an amortization calculator, understand the real interest costs. Get a long loan if you need to, but manage your cashflow to pay down the debt quickly. Interest on a large loan is a cancer on your overall wealth. Ownership costs and purchase price are nowhere near the same thing.
And lastly since its tax season: The tax write off for interest argument is bullshite. Spending $100 in interest to get $25 or $30 back in taxes is never a good investment.
3.65 rate 15 year loan= $30,000 interest for every $100,000 borrowed
4.5 rate 30 year loan= $82,000 interest for every $100,000 borrowed
I spend most of my time in New Orleans, this part varies by locale but here is my example.
I would argue anyone who tells me a house in New Orleans is a good investment is a moron. The total ownership cost of a house in New Orleans is a terrible investment. I did the math on the house that I rent part of when it sold recently. I also did similar calculations on condos I could purchase that are comparable to my rental. Here is a breakdown of my example house: When I say approx that means rounded number not a guess.
Sold for approx $1.7 million
Prop Taxes: approx $24,000/yr
Insurance: approx $28,000/yr plus windstorm risk exposure approx $100,000 (deductable)
Interest cost assuming 30yr and 20% down
$977,425.29
Taxes and Insurance assuming no tax inflation or premium inflation (obviously over conservative)
$1,560,000
So you're looking at a cost not including your principal investment ( $1.7 million) or maintenance/utilities/capital improvements of nearly $2.6 million. Add your principal and you get about $4.23 million in 30 yr costs. Remember now we simplified, taxes would go up, insurance would go up, often by a bigger number than inflation.
If home prices continue to rise by an average of 3.4% annually over the 30 years your house will be worth $4.6 million with a minimum outlay of $4.23 million. Once you add in maintenance/tax+insurance inflation/loss risk due to poor insurability it really is a terrible investment.
The 8% difference in projected value over costs won't even come close to covering upkeep costs, let alone make the downside risk tolerable.
When I looked at the numbers on 1-2 bedroom high end condos the numbers were actually even worse due to comparable rentals being so affordable.
Bottom line: Look at an amortization calculator, understand the real interest costs. Get a long loan if you need to, but manage your cashflow to pay down the debt quickly. Interest on a large loan is a cancer on your overall wealth. Ownership costs and purchase price are nowhere near the same thing.
And lastly since its tax season: The tax write off for interest argument is bullshite. Spending $100 in interest to get $25 or $30 back in taxes is never a good investment.
3.65 rate 15 year loan= $30,000 interest for every $100,000 borrowed
4.5 rate 30 year loan= $82,000 interest for every $100,000 borrowed
Posted on 4/2/14 at 11:32 am to jtmiller02
Closed in Dec 2012 at 3.25% on a 30 year fixed. Was building at the time and they just dropped right at the right time and then started creping back up. Couldn't have been luckier.
Posted on 4/2/14 at 12:31 pm to jtmiller02
quote:
Prop Taxes: approx $24,000/yr Insurance: approx $28,000/yr plus windstorm risk exposure approx $100,000 (deductable)
Holy shite. Guess it's all relative.
Taxes on 1.7M here in Franklin would be around 9k and insurance would be 2k max. That's a 40k a year difference
![](https://images.tigerdroppings.com/Images/Icons/IconLOL.gif)
Posted on 4/2/14 at 2:36 pm to jtmiller02
quote:
the only real way to get a good deal on a house is to pay down the mortgage much quicker than 30 years.
How you handle the financing has nothing to do with the value of the house. If your borrowing rate is less than the rate of inflation (taking into the account the mortgage tax break) you should string it out as long as you can. It is literally free money.
Popular
Back to top
![logo](https://images.tigerdroppings.com/images/layout/TDIcon.jpg)