Quote:
Originally Posted by Red
Makes perfect sense to me. You could afford a better house and it seems like you will always go for the most you can afford.
700K house - DP of 5% = 35K. Mortgage of 665K
450K house - DP of 5% = 22.5K Mortgage of 427.5
Even if the payments are the same due to interest rates, you always go for cheaper.
It's always about the principal, not monthly payments.
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What I'm saying is if someone wants to buy today's $500 K house, requiring a DP of $25 K - mortgage of $488 K.
What would they do if prices dropped to the levels you suggested?
They might buy a $450 k house, requiring a DP of $22.5 K - mortgage of $439 K
What's always about the principal? I have no idea what point you're trying to make? In my experience most people understand what amortization is and realize their house needs to be paid off. With that they try to buy the amount of house they can affoard based on the overall payment.
I've tried to explain to people the interest paid over the term vs. principal but most people lose interest (haha) after montly payment. That said I mostly chat to people in their 20's and 30's.