First off I'd like to apologize for not writing in a while. I don't know why, but I just didn't feel like writing. I hope you understand. Now I want you to follow me on a thought that became clearer as I crunched numbers and pieced my thoughts together. I wanted to share loan rate versus house price as the title illustrates. What do I mean by this. Let me give you a very simple scenario, and I add the disclaimer that I am not a loan consultant, so my numbers are without other fees and costs of a loan. The numbers I show are simple loan amount, interest rate, total paid, and base monthly payment. Here goes:
Scenario 1
House price: $300,000 Down Payment: 5% or 15,000 Loan: $285,000 @ 6.25%
monthly payment: $1,754.79 ($1,484.38 interest only) Total payment: $ 631,725. 85
Scenario 2
House price: $270,000 Down Payment: 5% or 13,500 Loan: $256,500 @ 7.5%
monthly payment: $1,793.49 ($1,603.13 interest only) Total payment: $645,654.68
If you get where I am going with this, it is actually cheaper to buy the more expensive home at the beautiful and enticing rates the Fed has given us for a short time until it can't be sustained any longer. Am I wrong in my thinking? Please comment.
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