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this post was submitted on 18 Jul 2023
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Running the numbers through an online mortgage calculator, I'm not seeing it quite that bad. Though, there are more variables than just the interest rate which need to be considered. I'm using the calculator at:
https://www.bankrate.com/mortgages/mortgage-calculator/
for those who want to follow along.
A $1,000,000 mortgage at 3% over 30 years, with no down payment has a Principal and Interest payment of $4,216
A $500,000 mortgage at 8% over 30 years with no down payment has a Principal and Interest payment of $3,668
So, not equal. If we assume a 20% down payment for each loan, leaving all other variables unchanged, we get $3,372 and $2,935 respectively. If we assume a constant $100,000 down payment (10% of the $1M mortgage and 20% of the $500k mortgage), the numbers are $3,794 and $2,935 respectively (there was no change for the $500k loan).
Overall, the claim seems to be incorrect. That said, if you look at the $500k loan, with a 20% down payment and drop the interest rate from 8% to 3%, the monthly payment drops from $2,935 to $1,686 and the total cost of the loan drops from $1,056,687 to $607,202, a rather significant drop.
Using basic mathematics isn't allowed in housing market discussion.
the only acceptable position is that mortgage rates must be forever low, so housing values can continue to rise!
anything else is unacceptable!
housing values can never fall! it's not allowed!
I miscalculated at 9% which is $4,023. Which is within $200 of the value. Regardless though my statement still stands. 6 interest points yields almost a 50% cut in buying power. Any of the other levers can tweak it but the core of the premise remains the same.