Why it isn’t a bad time to buy a home?
Wednesday Jul 14th, 2021Share
If you are thinking about buying a home but may be a little scared about the market because of the news headlines, this video is for you.
I just want to put the market in perspective.
Let’s assume for these scenarios, that you have a 5 year mortgage with 25 year amortization.
If you bought a home 2 years ago and paid $800,000, put $100,000 down, your interest rate would have been 3.9% and your monthly payment would be $3,600.
$3600 a month in the first year x 12 months = $44,000 in mortgage payments in the first year.
Out of those mortgage payments, $17,000 would have gone towards the principal or 40% of your monthly payment.
Over 5 years you would have paid $92,000 towards your principal.
If you bought a home today for $800,000 (well really that same home would cost about $950,000 today so let’s use that number.
Purchase price $950K, we will use the Same downpayment of $100,000
So now your mortgage is $850,000 but your interest rate is now only 1.6% making your payment $3,400.
In your first year you would make $40,800 in mortgage payments.
The difference is that $28,000 of that would go towards the Principal in first year which is 70% of your monthly payment (the lower the interest rate, the more money goes towards principal)
So over 5 years, you would have paid down $140,000 towards your principal.
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