Quote:
Originally Posted by Enoch Root
interest rates: 9%, 7% and 2.5% respectively
|
You tell me which situation would be easiest for a young person entering the market. Here are the three examples with a 20% down payment and a 25 year mortgage at those rates with all the dollars inflation adjusted:
1969: $53K down and $1749 a month
1998: $53K down and $1479 a month
2017: $150K down and $2688 a month
So a person now has to save up 3 times as much of a down payment and their mortgage payments are 50-80% higher than in the previous examples. You could get a 10 year mortgage on that 1998 house and still be paying more than $200 less per month than the 2017 one. Hell, you could literally have a 0% interest rate on the $750K house and the payments would still be 35% higher than the 1998 one.
And of course the older examples are vastly easier to pay off early. If you can manage $200 a month extra towards your principal you'd pay off your mortgage 6.8 and 6.3 years early in the first 2 examples respectively. In the 3rd example you'd need to throw nearly 4 times that much money every month just to knock that amount of time off of it.