Friday, November 5, 2010

Update: November 2010

As November goes into full swing, we are planning to close on our refi on Wed of this coming week.  We were able to lock into a lower interest rate of 4.125.  We'll see how much that saves us.  They said our mortgage PLUS tax and insurance should be somewhere in the ball park of $1075 a month.  That is incredible.  We've actually paid $43k into this house as downpayment and extra principal + over $20k in interest payments over these last two years + $30k for renovations. 

That's right... over $20k in interest payments alone and almost $100k put into a house in 2 years...  I am kinda glad we got a lower interest rate.  It cost us a couple thousand to refi, but that gets rolled into our new mortgage.  Oh well.  Owning a house definitely has a LOT of cost up front, but if it will definitely take a bit of time for it to pay for itself. 

Had we just rented a place for $1500/month for the past two years, it would have been: $36k.  But instead we paid about $1414/month of which we got about $300 went into principal and $100 came back after taxes... Our house is currently worth about $233k according to Zillow.  If we sold today, we would have lost about $31k.  Which would have been about the same as renting a place for two years. 

If we bring this calculation out to 5 years... based on the same assumptions: 1500/month rent would be about $90k.

On our current 5.5% interest rate, we would have paid about $45k in interest payments + $19k in principal + $18k in insurance/tax...

If there was appreciation on home prices in five years, my estimate about $269k... we should be ahead by about $21k... compare that to a complete loss of $90k had we rented...

If there was no appreciation on home prices... if in 5 years, it stayed at current Zillow estimate of $233, we would have lost $15k... not bad compared to $90k if we just rented. 

Home prices would have to decline to $158k in order for us to be equal to renting.  I definitely do not believe this will happen considering all that money the mint is printing.  We probably get inflation before that happens. 

Of course I didn't take into consideration this new interest rate and new mortgage rate.  But had we continued it still would have made sense to buy. 

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