Quote:
Originally Posted by ranchlandsselling
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.
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Then I am way to old for that
My point is that with the amortizations extenended it allowed people to borrow more. That resulted in higher demand and prices. Now housing is very expensive. Slash it in half and now people have more money for everything else. Now everything else is paid from HELOCs. (in a lot of cases).
Why principal is important? If you have 1K a month left over it is way quicker to pay off a 100K mortgage than 300K.
I'd take a higher interest rate over higher principal for the same payment. Because ever dollar that you have left over (saved) has so much more meaning.