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PSA, you will actually pay $1M for your $500k house at today's rates (lemmy.world)

submitted 4 days ago by randoot@lemmy.world to c/personalfinance@lemmy.ml

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This might be duh for some people, but if you're like me and considering a mortgage; at today's rates in the US at around 5-6%, over 30yr mortgage you will pay about same in interest as you will for your house price.

Your $500k house will cost you around $1M total over thirty years.

I was surprised.

https://m.mortgagecalculator.org/?q=A1Nzy-8KX

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[–] sugar_in_your_tea@sh.itjust.works 2 points 3 days ago

you have an outcome in mind and decide to adjust the figures to meet it, rather than reflect the reality.

More that I'm reproducing convincing evidence in a form that I understand and that I think I can communicate effectively in a comment.

My point is that you don't need to own a house to retire or be successful financially. Your choice of rent vs buy is far less important than other decisions you could make. "Throwing money away" on rent or mortgage interest is missing the mark, and both are symptoms of not understanding finances.

quite common to have to move, and purchase appropriate furniture, ever 2 years or so

I also didn't list home insurance or taxes, which in my area comes to ~$4k/year (and we're on the lower end). That's enough to cover the moving expenses if you pay someone to move you every 2-3 years. However, I've also known people who stayed in the same apartment for over a decade.

I tried to account for the biggest factors and keep things simple to prove the point that it's closer than most probably assume.

You also have the home value appreciation much lower than historical or current and the investment returns higher than norms

I thought they were pretty reasonable. This article cites 3-5% for home appreciation, and this article cites over 10% for the State&Pepper 500 since 1957 and just shy of 10% going back to 1928. My numbers don't account for inflation, which is why I added inflation to rent.