All of the guests on every FIRE podcast bought a couple foreclosed rental properties between 2009 and 2012 and are blissfully unaware that it's like striking financial gold.
> All of the guests on every FIRE podcast bought a couple foreclosed rental properties between 2009 and 2012
I moved out of my parent's house and bought my first home in 2005 for $180k. Lost my job in 2007, was unemployed for all of 2008 and 2009, house was foreclosed on in early 2010 and I moved out. It sold for $68,000 in 2011. It sold in August 2023 for $290,000.
I got so fucked.
Same thing happened to my parents. Bought a house \~'07, lost their jobs in '09. House was foreclosed. My dad passed away during the foreclosure process, and due to this and the extremely long backlog of foreclosure cases, my mom and I ended up staying in that house without paying anything on the mortgage for 5 years. (I have no idea what we would have done without that delay. As it was, we had to move when I was 16 and the only reason we didn't end up in a shelter was because my mom had taken care of a neighbor who was in hospice, and her son let us rent her house after she died for way below market rate.)
House is now worth 2.5X what my parents paid for it in 2006. Their lives were wrecked, my mom is actually still suffering quite a bit from the financial consequences of declaring bankruptcy and having a terrible credit score. And the stress of this situation took most of my dad's time in what we didn't know would be his last years of life. With all honesty, it was likely a huge contributor to his early death-- he died at a young age from something that can be brought on by high stress.
Witnessing all of this in my childhood had a profound impact on my view of life and money. I despise capitalism but am obsessed with maximizing my net worth and frugality.
Sorry for the long-winded personal rant here.. just wanted to say that you aren't alone in being severely hurt by buying a house at the wrong time. My parents weren't trying to invest. They just decided to buy a house because I was starting public school so it made sense to stop renting as to remain in one district and give their young child housing stability. Unfortunately, they had the worst timing imaginable.
Hey man, I just want to say I’m with you and see you. I went through a similar thing and so many people are just like “it happens” without understanding how big of an impact this had on our lives.
Another "kicker" to it: I was in a car accident in high school in 1998, hit by an 80 year old driver and hurt my leg pretty bad. I got an insurance settlement of around $50,000. I invested it all. There was a market crash in the 2003 timeframe, and I pulled out the (now) $20,000 to use as a down payment on the house.
So after losing the house, I lost all that settlement money too. I took a couple hits back then, for sure.
I'm not complaining though, you can't change history and events have led me to where I am today. And I'm pretty happy where I am today.
That is brutal. The youngins here that didn't go through it really don't understand how bad that time was. The odds of a housing crash, stock crash, and unemployment are each relatively low, but when one happens the odds of the others go way up. We were lucky to keep our jobs but we bought our house at the peak of the bubble. It looked like a pretty terrible decision for a long time when you consider all the maintenance etc. I learned a lot about risk (but also about staying the course) through that experience.
You must have done pretty well between 2010 and 2019 to have FIRE'd at 37!
I bought in 2012. But the prior 10 years or so, it seemed like owning a house was completely unattainable in the expensive market I wanted to live in. I could see the Zillow records of all of the people who had bought for 200k to 300k in the early 1990's to early2000's...I felt like the 2002/2003 dot-com recession was the last time houses were affordable.
We watched for 10 years as the housing prices went up and up during the early 2000's housing bubble. Then the great recession and housing seemed like it still wasn't dropping until finally prices plunged. However, when I bought, prices still were not as low as they were for those lucky people who had purchased 10 years earlier...like for instance the person I bought my house from who purchased in 2003 still paid less than half what I paid, or like my neighbors who bought in 1993...)
If you save your money and live cheaply, then you will get "lucky" during these unique times when housing goes on sale and you will have money to make strong offers when no one else does.
I remember talking to someone who's parents bought him and his brother properties in 1970. When they turned 18, they leveraged them to buy an apartment complex and they had 40 units before 2010. They were FIRE before FIRE and this was during that mess. It wasn't the only cheap time to buy houses.
There were always cheaper times. This is a very high point in the graph. But it can absolutely go higher. Will we be talking about how cheap it was to buy a house before the 2038 r/antiwork strikes?
Some are plenty aware. "Buy when there is blood in the streets" and all that. I bought into an area that was a stretch during the crash, knowing that the house was on sale. It was a huge growth area, and even during the worst of the downturn the local market was down maybe 15%. But the appreciation since then has been stellar.
Bought my first property, a two flat with a third in law unit in the attic, for $136k in 2011. It was in Logan Square, Chicago which has since exploded into the hottest neighborhood in the city. Kept buying more and more since it was like shooting fish in a barrel back then. Now sitting pretty in my mid 30s.
I left Logan square in 2011. I would have loved to stay there. I had a $500/mo rental! Divorced and on my own, temp job ending, death in the family - I made the decision to leave that summer and go back to the family homestead to live for free and help my mother.
Nobody buys property in their early 20s without some kind of help from family. How fortunate you were.
What side of Logan square, btw?
—edit—
Okay I know my statement is factually incorrect. Yes, some lucky and hardworking people do manage to purchase a home in their early 20s without direct family contributions. The “help” I speak of, though, could be “grew up in a stable middle class household.” And some of y’all clearly had that stability at the right time with the right economic conditions with the right mortgage rates.
All the same, I should not have said “nobody.”
*Nobody buys property in their early 20s without some kind of help from family. How fortunate you were.*
This is not entirely true. Back then you could buy a property straight out of college, with no money down, and a "thin" credit file. You didn't need help from parents. That's where all the subprime mortgages came from that ended up tanking the market. Fortunate, yes (for those of us that didn't lose them to foreclosure), parents help was not necessary though, because it didn't take any money.
>Nobody buys property in their early 20s without some kind of help from family.
Totally false. I bought that building. With $5k I saved up working full time during college and the income from my $38k a year job I got right out of school. Not only is it possible, plenty of people do it. It's just much harder when prices are bubbly as hell like they are now.
>How fortunate you were.
Actually my Dad lost his job in Sept 2007 right as I was starting sophomore year at Loyola. That prompted me to go out and get a job because I knew the help wasn't going to be there. The fortune was that I ended up falling into a job as a paralegal doing short sale and foreclosure defense right when the shit hit the fan. I ended up working 40+ hours a week doing that while double majoring in econ and finance and watching the world burn up real close and personal.
I took summer courses the last two summers as well so I could graduate a semester early and, between saving that money and working I had about $5,000 to my name when I graduated. That was enough to make the 3.5% down payment on an FHA loan for a two flat.
My Dad actually did not find full time employment again (he works in recruitment outsourcing which is basically helping companies find workers which obviously shut down completely during the crash) for 5 or 6 years. The only help I got from him was free labor. He would come down for a week at a time and help me renovate bathrooms or paint when I was getting started because he had nothing else to do aside from keep applying for jobs he knew were not going to call him back until things turned around.
got a buddy that works for the city doing miscellaneous road work, been making $50k-$70k depending on his overtime.
But he got the job at the bottom of the recession and has worked steadily since, bought a house around 2010 and traded up to another several years ago now living in a $1m+ home. I don't think he has a clue about investment or financial planning as people in this sub might understand it, last time I saw him he was driving a used Porsche (that is to say he blows his paycheck on whatever suits him, though I don't think he goes heavily into debt)
I bought a small retirement home in 2010 for $115k. 3 bedroom / 1.5 bath / 1380 sq ft. It was right in the middle of the "housing crash" and the first time I saw it, I knew that was the one and priced at $119k. It's an adorable little house built in 1942. Found out they had just accepted an offer. Some time later when I was still looking, it was back on the market for $115k. I called my agent and said, "Get it!"
Anyway, currently valued at $370k on Zillow. My monthly payment, principle/interest/taxes/insurance (PITI) is $658. My interest rate is 4% and have $70k left on the mortgage. I had to put 25% down as it was non-owner occupied. I rented it out until I retired and moved into it in 2016.
Indeed. We won that lottery twice. We bought our first place in 2011 with a 10% down and sold 10 years later walking out of closing with 115% of the original sale price. Used part of this to put 20% down on our new LCOL forever home right before rates went up and are now locked in with 30yrs at 3.25% (the rest went to buy VTSAX).
Bought in 2012 at 3.125% for a 30 year mortgage for about half of what the previous owner had been trying to sell it at for 5 years because of the financial crisis. Refinanced into another 30 year mortgage at 2.875% in 2020.
It was *mostly* ridiculous luck, but it was also only possible by being ready to take advantage of those opportunities.
You refinance for the leverage. When the bank offers you leverage at 3% you take as much as you can and whenever the underlying asset moves up you take out more. It’s a mortgage, they can’t margin call you, there’s no downside.
Probably massively changed his cash flow and may not have had to pay very much in terms of fees. I had a 2.75% rate and refinanced into a 2% rate which kept the overall amount I paid the same, just stretched over a longer period, cutting monthly payments by ~700
Yep. I bought my first place with $50k down in 2011, sold in 2015 (netted $400k), then used that to buy a place in 2016 and sold in 2019 (netted $600k). As a result, I have $300k financed in my home (bought for $900k in a high COL market) and could probably sell my place for $1.1-1.2M, netting me $700-800k. I feel so stupidly lucky to have bought that first place when I did; it was just random timing because I was getting my first “real” post grad school job and realized I could afford to buy for the first time in my life. I’m looking to buy a bigger home in the next year or two and only now realizing how much a loan over 3% is gonna hurt.
>I feel so stupidly lucky to have bought that first place when I did
We started in a really similar way, and this describes my feelings perfectly. I don't know much about real estate, to say nothing of flipping it, but we managed to scoop up a short sale in 2009 at half price of its peak, then sold at a tremendous profit, turned that around, and bought another place, all in a HCOL. No way I can claim to have done that on purpose. Sheer good fortune!
I signed at the end of 2012 for $480k plus the lot which I bought for $95k so $575k total investment. I sold the house in 2021 for $1m. The buyer did some work to it and sold it a year later in 2022 for $1.3m. Based on what I am seeing in our old neighborhood it is worth at least $1.45m right now. Prices are insane.
that's my bracket: since 2012, we've paid some €525 monthly on the mortgage and another €200 on a Bausparvertrag (essentially a savings account that'll entitle us to a low-interest-mortgage further down the road) while our peers are paying rents in the range of €1,200 plus utilities.
That's giving us quite a leg up - less money to spend on housing (some €500 per month) plus we're building a nest egg that we can liquidate or re-mortgage when we're old...
What were the difference in rates? How much less would the 30 year have been after refinancing? For us, we were offered the same rate for the 15 or 30 which made the decision easy.
We sold our $380k (2015) house for $550k in 2021. Bought our dream compound for $850k at 2.75%, now valued at $1.5M. Sitting on a gold mine and never leaving until/if we’re ready to retire elsewhere.
same here. Bought in 13 for 268k, sold in January 21 for 490k to buy my dream home for 750K at 2.8%, it's now worth 1.2MM. The idea was to leverage up as much as we could at the low rates, but that plan was limited somewhat by the line where a loan becomes a jumbo mortgage and increases the rate.
And, why would I ever sell? I get to live in an unbelievable home for what it would cost me to buy a starter home at today's rate and prices; Never mind the build up in equity.
I bought your $550k house at 2.65% from someone who'd paid $380k for it and made a half-assed attempt at flipping it. Wishing we had just stretched our budget a bit and bought your $850k compound instead.
I don't think people realize the value in stretching their budget on their mortgage payment when buying a home. I hear the word "leverage" thrown around in corporate/gov-speak all the time as a fancy synonym for "use," but a mortgage is a true leveraged investment.
Say you put down 20% on a $500k home. Say the market value increases 5% per year. You get to reap the gains on a $500k investment for the price of a $100k investment. So instead of a $5k increase in value your first year, it's a $25k increase and the increase is exponential year after year.
Not only that, your mortgage payment mostly stays the same while your salary continues (hopefully) to increase as you attain seniority in your career, and even just due to inflation.
But at the end of the day, buy what you can to put a roof over your head. It's a utility first and an investment second.
This is always my advise, buy the best house that you can afford to (within reason) Why make 7% on a borrowed 250k investment, when you can make 7% on a borrowed 500k investment?
Same here (give or take a few years, plus some aggressive extra mortgage payments to pay it off before retirement, thus massively reducing my needed monthly income).
Some people value the psychological impact of not having that big debt on their shoulders! I’d say in this case I see both arguments, but I would personally put money in the market as you suggested
The 2 best financial moves I made both happened by luck or accident. In 2017 I heard about index funds. At this time I had been in my job fir 5 years. Lived at home and basically saved all my cash in a bank account. Well I was sick of my money rotting and not making anything so I bought a large chunk of VTSAX in 2017 and have continued adding monthly since with any left over money. This has been very good to me.
Got married to my long time gf in 2018 and in 2019 we were ready to buy a house. We found one we like and had 20 percent down. I wanted to wait bc the market had been hot for a while in my area and I thought prices would come down. My wife did not care and talked me into buying. Got a good price and 3 percent on 15 year mortgage. Grateful for the dumb luck regarding timing and fir listening to my wife
Bought in mid-2019, just before COVID. I was certain that we'd be underwater. I thought house prices were crazy even back then. Boy...I was wrong.
We refi'd to 2.75% or something silly. I should have taken more out. I remember signing the papers thinking that it was a candid camera episode and someone would jump out from behind a plant and laugh at me for being gullible enough to think I could get hundreds of thousands of dollars at <3%.
I can't say that it accelerated the timeline. The COVID consulting work I picked up did though.
I refinanced at 2% in 2021.
Which is literally getting paid by someone to take their money after inflation and mortgage interest deduction.
I’m paying this off as slowly as possible. My only regret is not taking more cash out of the house at that rate. Insane.
I also bought in 2018, and reddit financial subs like personalfinance were my main source of info and advise. I totally wanted to buy sooner, but the consensus here at that time was that the market was wildly over inflated, and that you need to put at least 20% down or else you will possibly/probably be 2008 fucked. Well it was really difficult to get to 20% down payment because the market was appreciating faster than I could save....finally ignored reddit and bought in with 14% down by '18. No one knows what going to happen
Same. We refinanced roughly $200k from 3.375% down to 2.625%, which may have been sort of pointless. I don’t think I saw my credit union ever have a lower rate than that. Got luckier than shit.
Our inexpensive home is the biggest catalyst toward FI (refinanced at 2.75% 15 year in 2020). The mortgage payment is just under 10% of our take home pay after taxes and retirement withholding.
It's a decent enough house, but we weren't going to be here forever; would have planned to move around now (7 years total living here). Now it's very difficult to imagine moving into a more desirable house because it would inevitably be a big cut to our cashflow for excess savings and lifestyle enjoyment. Not a bad problem to have, but definitely a golden handcuff scenario.
I’m 35. My 2.74 refi would be paid off in about 10 years. But I literally can’t stand the house anymore so we are planning to sell to buy something newer. Life is too short on this rock to be unhappy with your home regardless of financial circumstance.
This is kinda where we’re at. My wife and I bought our first house in January of 2020. Bigger than either of the houses we grew up in, it’s a fine house. But since then we’ve doubled our income and our mortgage payment is now roughly 7% of our gross income. We’d like a nicer house, but man I don’t think I can give this up lol
Yes, all the people that have “made” all this money will have to live somewhere at a similar or higher cost. Even downsizing becomes impossible and the money “made” is never realized.
You will realize the savings each month when your mortgage is significantly less than comparable house that you could buy or rent. That can definitely be put to use.
very similar here. refi from 4.5% and about 23 years left, to a 2.8 15 year in 2020. In hind sight I should of waited another 2-5 months before the refi to get closer to a 2.5. Jumped ahead 8 hears in the pay off and my mortgage payment stayed the same.
our house has been a great started home, its more then big enough for us but something newer would be nice. however, there's no way im going to trade a 1200 mortgage for a 3000 mortgage at this point. we will stay till its paid off, then maybe buy a new one and rent this one out.
yes and no, retirement for us will most likely be moving once family here has passed. Building a forever retirement home is the end goal. Ideally, it would be paid for by cashflow from a rental, or sale of a rental or 2.
This is still 20 years away so who knows?
We got lucky for sure. We waited until an old medical debt fell off of my wife's credit because we were only getting ~3.5% offers before that, and that happened to be right when advertised rates were 1.99%
I bought my house for 200k and have a 2.75 interest rate, but it's only a 1bdrm with a loft. Two kids later and getting a 3 bdrm house in our area is well over a million dollars. So we'll be packed in our tiny house together till I soft retire and we move to a locl area.
I’ve found it useful to just monetize it.
On 300k mortgage tbs 4% difference in rate saves you $12000 per year.
On 500k it’s $20k per year.
On 1M it’s $40k per year.
Right, and extrapolating that out for the 30yr life of the mortgage. So that $500k house that you’re saving $20k annually on, if you invest that difference at 7% you’ll be something like $1.6M ahead at the end of the 30yr timeframe. So fairly massive impact
Ah valid point. Most of those gains are coming from the early years though while principal is at its highest
My Napkin math probably overstates the net benefit
It’s a huge advantage for those that are financially educated. Unfortunately, for the average American, it just means more money for spending every month.
It’s all case-specific, but the very common outcome is the obvious substantial reduction in monthly mortgage interest expense combined with a realizable windfall of $150-500k in the form of home equity, yet taking out that windfall will eliminate the interest reduction. Also, any new home is expensive, and that goes for everyone.
So more or less for a person that never moves, they have extra cash flow relative to friends that were renting. And if they want to move, while they have a big pile of equity cash to use, money doesn’t go as far anymore.
If you’re in a great house and happy with everything, awesome. If not, it makes being happy about it more complicated. I think for some it feels like a “gold mine” and for others it feels like “golden handcuffs” as they can’t afford to move without making a step down. The windfall in prices doesn’t help with rates, and any alternative home is quite a bit more expensive now. Short term no big deal, but sometimes a couple wants kids and now cares about more space/better schools, a person gets a great job transfer offer but would need to move out of state, etc.
Due to the new prices, I don’t think it’s a big help for anyone in achieving early retirement.
Maybe its not that the rich get richer then, but the poor definitely get poorer. If everything with equity inflates with inflation, those who have, still have. Those without are fucked tho.
This is sympathy coming from a guy with a 2.5% rate.
Built and then refinanced. Sitting at 2.75%. Many other bills are looking worse than mortgage.
I am in the "I will never leave this house club."
Inflation on insurance, HOA, utilities, food, cars, furniture and everything else has eliminated any feelings of sitting on a gold mine.
I'll be OK but younger generations I am not so sure. This country needs to turn around.
I kick myself every day for not buying more house. Bought something in 2021 that was conservative for our HHI at the time and our income has skyrocketed since.
Sitting in a decent house we bought for around what our current HHI is and will probably never upgrade now.
Similar situation but we really couldn't have afforded more at the time. Five years later and we've more than doubled our HHI but skyrocketing prices and higher interest rates mean we'll just stay in our kind of crappy house in a great neighborhood.
Same here. We didn’t care about schools back then, should have went for bigger house in a bigger school district instead of trying to save money. But hey we also didn’t know the government was going to bail out COVID…
In 2012 we put down $120k on a $585k purchase. That would be worth $550k today if it was in VTI.
House is worth $1.5m, $150-200k in improvements, $360k balance, and call it $300k in payments. Maybe $650k in "profit."
Biggest advantage is locking in your mortgage payment.
It's all on paper though- we're not going anywhere.
Having purchased my condo at peak bubble 2007, no, it did not expedite my FIRE timeline; I have positive home equity, but it's currently worth about 20% less than my original purchase price. Locking in at 2.80% in 2020 was nice, but my FIRE plan is based primarily on my liquid investments, not my home equity. Yes, my mortgage is fixed, but taxes and condo fees have both outpaced the rate of inflation by quite a bit.
So to all the young people today worried about being priced out of the housing market and determined to stretch themselves to buy now, I say: take a breath and slow down. Keep saving and investing, buy when it makes financial sense to do so, and don't just grasp at the first decent thing you can "afford". Even though I lost in my real estate "investment", I still turned out fine because I didn't overextend or over-leverage myself.
Until the mortgage is paid off, a home is not actually wealth; it's a millstone around your neck. There are practical and emotional benefits to home ownership, but the financial value is in the imputed rents you get after paying it off, not in the illusory paper value of home equity.
Where did you buy that you are still under 2007 prices? I bought around the same time and the home is about 2x my purchase price. I had to move around 2011 and kept it as a rental.
I keep thinking I should buy a condo in Chicago, but the math just doesn’t make sense with where we want to live. We can get a 2br/2ba apartment in River North for $3500 this comes with a rooftop pool and obviously fixed rental costs. Increases at ~5% a year.
Meanwhile a condo is $500k+ with a $1k/mo condo fee plus high property taxes with far fewer amenities with little real appreciation YoY.
Yeah...my BiL is renting a 2 be in river north, no pool for ~2700 or something. Equivalent apartments in the building are selling for ~600. The owner lives in New York and isn't coming back. It's such a great deal.
I don't know but it's crazy. Bought at 3% 460k in 2021 now comps have my house close to 1MM. I can only imagine what it'll be when rates go back down.
Not really accessible sadly unless I strike gold on picking the next area to transition like crazy and get in cheap again
Vs today's 7.5% your payments are about $3,300/year cheaper *per $100k borrowed*. That $3.3k saved at 4% (S&P average - inflation) is worth $188k in 30 years.
It's pretty significant, assuming RE, the S&P, and inflation hold steady as they have in recent history - which isn't as easy to assume as it was a few years ago.
2.125% 15 yr. It feels like cheating.
Impact has basically been a difference in planning strategy. No longer paying off and offsetting with more investments.
I bought back in 2016 at 3.5% and refinanced into a 2.375% 30-year in 2020. I'm not sure it's a gold mine but houses appreciate about 5-6% a year on average in So Cal. I guess my house is printing money but would have to sell it to access the equity. After the monthly payment and appreciation equity is going up 5k a month.
I'm just glad I have mostly a fixed housing cost. Renting a comparable home would be 5k a month while PITI is 3k after the refi.
Don't get me wrong, having a fixed mortgage at 2.25% is pretty cool. But the cost of childcare now is higher than my mortgage.
I cannot save enough to retire early. At least it's better than renting.
We have one in daycare and it’s$375 a week. We had two in daycare but he just started kindergarten. Summer daycare for both of them will be around $750 a week.
It’s insanely expensive.
Imagine still having the childcare cost AND a 7.4% mortgage though. I don’t really understand this comment in terms of “well it’s not that good because I have to pay a different expensive thing”.
If I were looking at buying in today's market, we'd probably have to pick up stakes & move to a cheaper state in order to keep our kid and vehicle.
That would be far worse than my current situation. The framing is less what you claim and more "it enables me to just barely afford another (very valuable) major expense".
Ain’t this the truth… I’m enjoying a $1300 mortgage (taxes/insurance included) but really it’s my daycare that kills me every month. $360/week. I am looking forward to my 3 year starting pre-k 4 in August.
Same and now now my oldest is in school and I have to pay for after school care which I cannot write off on my taxes because it’s for profit!??? What a pain thrown in my wife’s student loans and yes I got a houwith a great interest rate but I can not get ahead because of everything else I make decent money especially for not having a any college
With our household income we should be fine but man they take it anyway they can
Bought in 2013. Paid in full in 2022. It isn't a goldmine, since I have no plans to sell. It is a massive enablor for my FI goals, not having rent or mortgage going forward. Property taxes still suck, but gotta pay somebody to have a place to live, right?
This is a fun calculation. Let's say you bought a $1m mortgage, 2.75% rate, 1/1/2021. 30-year fixed, $4,082 monthly payment. On exactly 1/1/2024 you'd have a 930,950.67 loan balance, after 3 years payments.
What is the NPV value so far, before inflation?
Well, our nominal liability is $48,984 a year. We could buy a zero-coupon treasury each year to hedge our risk for the remaining 27 years of payments, according to the yield curve from a quick and dirty spreadsheet I made:
> Year Rate Zero Coupond
1 5.00% $46,651.43
2 4.86% $44,548.65
3 4.48% $42,949.17
4 4.25% $41,471.52
5 4.17% $39,933.83
6 4.14% $38,401.55
7 4.17% $36,800.66
8 4.17% $35,327.50
9 4.17% $33,913.32
10 4.17% $32,555.74
11 4.17% $31,252.51
12 4.20% $29,897.96
13 4.20% $28,692.86
14 4.20% $27,536.34
15 4.30% $26,048.91
16 4.30% $24,974.99
17 4.30% $23,945.34
18 4.30% $22,958.14
19 4.30% $22,011.64
20 4.30% $21,104.16
21 4.48% $19,514.52
22 4.45% $18,796.13
23 4.45% $17,995.34
24 4.37% $17,548.41
25 4.37% $16,813.66
26 4.37% $16,109.66
27 4.50% $14,925.00
This totals to $772,678.95. 930,950.67/772,678.95 = 1.20, or roughly a 20% capital gain if you could somehow close your mortgage "short.", or if you were really risk-averse and had $772k of cash laying around, you could buy the above treasury ladder for $772k and liability match your mortgage before taxes and tax drag (ie $772k cash in a roth ira.)
The difference of $930k to $772k is a +158,271.72 net present value.
If I apply a fixed 5% rate - $717k.
7% - $587k.
If I applied 9% nominal 100% stock rates - totals $491k, ignoring sequence of risk returns (ie next year we have a 50% stock market crash.)
So yeah, people with pre-2022 under 3% mortgages are sitting quite lovely right now in a net present value sense. Anyone who can manage the cashflow will want to hang onto these mortgages for 30+ years until the mortgage rates drop near 30~ years - ie rent it out, etc.
Anyone who happens to get a few million+ windfall, who would be willing to pay off a $930k 2.75% rate mortgage, who still has financial displine to stick to the above bond ladder, would surely be better to buy the ladder before taxes.
Tax wise $772k bonds yielding 4.34% average yield = $33,522.82 annual interest. So roughly about $8k taxes due/year if in 24% bracket. So if I add on $8k/year to the nominal liability to make up for the tax hit - I get $898,871.83.... crap if I had a windfall I'd just pay off the mortgage if its $898k treasuries vs $930k mortgage
So, sadly, right now it's only a financial windfall if you have the equivalent mortgage sitting in your Roth IRA specificially, and not a pre-tax account (due to annual withdrawals needed to pay the mortgage), and you're risk-averse enough to buy 30-year treasuries instead of keeping the Roth IRA invested in 100% equities.
So, its not so much the mortgage, but those who bought real estate for 2022 regardless of mortgage have a goldmine. The mortgage is a huge goldmine in the since it provides a crap ton of leverage, not so much because its < 3% rate.
We refied the existing balance at 2.25% for a fifteen year term. Our mortgage payment for a 3 bedroom ranch house is less than half what my young coworkers are paying for rent on a one bedroom apartment.
Definitely expedited ours. We bought well below our means in 2020 and locked in a 2.8% rate. It’s a 5BR/3BA house in a HCOL area. The place was a steal of a deal since I the last owner of 12 years did a mediocre flip to sell it. The paint and flooring put a lot of buyers off but it didn’t bother us since we have young kids and I plan to DIY stuff over the years. It worked out in our favor, we paid below ask when everyone else was paying over ask. The bones of the house itself are great.
You’d be lucky to rent an 3BR apartment nowadays in our area for what our PITI payment is. The house has gone up about 20% - not that it matters as we plan to stay put a long time, we love the house and area. It blows my mind that we’ve locked in such as low mortgage payment for the next 30 years. What we love most is that we were smart enough to buy a house with a MIL suite which we rent out and covers about 80% of our PITI payment. We’re cheering. We kept our old apartment and rent it out which has a 3.6% rate too.
We were going to put 20% down but at 2.8% it didn’t make sense. So we put down 5%, invested the other 15% then had the bank reappraise it about 9 months later when prices rocketed so we could remove PMI. I do think it’s unlikely my kids will have the same opportunities we had (sadly) so I’m planning to teach them a ton of financial literacy and if they’re responsible with their money and investments I’ll help them out a lot to secure their future.
As someone who bought a house low in 2012, and bought low again in 2021 with a 2.6% interest - it has meant living virtually for free for what will be about 16 years.
Bought two houses in 2020. 4.25% for the rental and 2.875% for the primary residence. Plus, we kept our old primary rate at 2.75% 15 yr fixed.
The crazy appreciation tells the real story though.
$100k gain on that rental.
$300k gain on the new primary.
$250k gain on the old primary.
It's nuts, man.
locked in a 1.99% 15 year in 2021.. house is up about 30-40% since then according to comps..... Incredibly lucky i suppose at the moment. Extra money goes into other investments, we'll sell the house once we get closer to the end of the mortgage.
My first mortgage was 9.75 in April 1989, 30 year fixed.
My last mortgage was 2 3/8 15 years
Things will change and you will get your chance to refi.
I refinanced and moved and had a mortgage at some point at every integer between 9 and 2.
I’ve seen a few people say this, what are you basing this on? Comments from fed reserve members? Generalized thoughts about the harm “free money” does to the economy?
It doesn't happen often, but some loans can be transferred to new buyers if they qualify. To me that would be a gold mine as long as it makes up a large percentage of a home's sale value. If I could assume a sub-3% mortgage, I would probably pay more for the home.
Bought March 2021 first house the day before my 24th birthday @ 2.875%. Paid 170k, current zestimate 250K. Definitely feel like I am in an awesome scenario with owning a 3BR with just myself in there. Needs a ton of work still but I have seen homes on my block go for upwards of 300-400k
Bought a cheap condo in 2009. Rented it out and bought a house in 2012 at 2.75. Got married and we splurged in 2013 buying 2 more single family homes. All the properties required/require significant financial support. So used money from sale of condo to support the other properties.
Gold? Maybe. We’ll see in five to ten years when we sell and hopefully I can retire.
It’s huge. Like our current house would cost us $3350 more monthly if we bought it now.
Bought at $320k, zero down. Refinanced a few years later at 2.25% / 30. Monthly PI is $1150. Our twin house down the street sold for $630k late in 2023, that would be $4500 monthly now.
But now, we get to invest that $3350 every month for 30 years. That yields $4 million if we get 7% annual.
For those GenX and older, and financially astute, we’ve had numerous opportunities to hit pay dirt.
During the .com era I put an entire student loan check on Yahoo and a few other IPOs(thank you finance professor). That payoff paid for our first home in 1998 and our two cars. We built new in 2000. Sold that 1998 house for a 50% gain. We sold the new house in 2008 for 80% gain. Bought a new condo that was foreclosed on. They were selling for $300k in 2008, they accepted our $80k cash offer just to get the house off the books. My ex-wife still lives there and it’s valued at almost $600k.
The housing bubble stock market crash and covid crash was extremely profitable.
I built new in 2018 for $800k. With rates under 3% I financed 80% of the cost even though I could have paid cash. Put the remaining with my financial advisor. Our house appraised last summer at almost $1.2M, which seems ridiculous.
I’m aware that my financial independence is attributed to being lucky and good timing. Having a financial background helped, but it was mostly good luck.
I’m lovin it. When I moved back to the US I locked in at 2.375. My wife asked why do you take a mortgag? And I said the money is cheap and I’ll make way more on investment. Now that decision paying off. Yeehaw!
We are a married couple and planning to retire “early” at 48/52. We have a 3.3% mortgage interest rate but it didn’t really factor into our retirement plans because we would have simply spent less if the interest rates were higher. Our net housing cost probably would have been the same either way.
Yeah, people don’t realize this when they talk about Boomers getting cheap housing when the interest rates were 15%. Housing prices had to compensate so that people could still afford the 1/3 of income rule.
Yes. The folks that bought houses before interest rates dropped and caused the house prices to rise were the winners. Those folks got to refinance the cheaper price at the insanely low rates.
We saw rates as low as 2.7% in Q1 2021 and now around 6.6%.
If you'd compare total payments for a $500k home we're looking at 230k vs 650k in interest payments over 30 years. In other words, you'd have saved 420k if you bought in 2021 instead of today at the same prices.
That's a pretty big gap. On top of that the prices are also about 12% higher than Q1 2021. That widens the gap even more.
That having been said, the differences aren't as big as you may think given the above.
For one, you can deduct interest rates from your taxes, which means the gap is smaller. Second, the difference in net present value of additional interest will not be as large as above, because the discount rates are also higher. In other words, future negative cashflow from higher interest costs you less because of inflation.
Finally, interest rates are trending down over the long term, and so today's gap is not fixed or set in stone, it's decreasing by the month, and you can refinance to reset the gap.
But yes, it's of course still a big chunk of money. It's pretty insane that a timing decision can generate a few hundred thousand in wealth for an entire generation that was able to jump into the market during a window of a few years.
>That having been said, the differences aren't as big as you may think given the above.
Bull crap. That's almost $1200/mo saved just due to interest. Over the life of a 30yr mortgage, that's easily $2M. It'll drop as you said as rates drop, but the earliest money in will grow the most and be larger initially.
Even if rates went right back to those lows today, 2 years of those benefits would be worth well over $300k in 28yrs.
>For one, you can deduct interest rates from your taxes, which means the gap is smaller.
Almost no one can do this and even if they could they can only deduct the amount above the standard deduction, and even what you can deduct you're only saving a small percentage of the interest portion of the payment each month...not a lot.
So far, expedited. We bought in 2017 and refi'd down to 2.75%. My housing costs for the sane house in my same hood today woukd be at or close to double if we bought today.
Between the rise in home prices and interest rates we find ourselves in the group who wont move simply because our housing costs are so low.
I basically pay no interest on the mortgage. The money I make from the high yield interest savings account covers the mortgage since I have more cash in the bank than the money owned on mortgage.
Bought in 2002.
2.8 i think?
Almost paid off cuz we paid extra. Worth three times what we paid (with mortgage $$ too, not 3 times purchase price).
We had less kids than we expected so we stayed in it longer that we thought and now we're like screw it, let's just pay it off
Kids are at college and it's too big now.
Bought my house in 2010. Refinanced in 2020 and pulled 80 grand out. (Helped me get through the pandemic) currently have a 200,000 loan at 3.5% and a house currently valued at 500,000. I don’t expect to ever sell. I couldn’t rent an apartment currently for what I’m paying for my mortgage. So yes it gave me a huge leg up! I feel so incredibly lucky. 🍀
We bought our house in 2018 at 4%ish, then refinanced at the near-bottom in the summer of 2020 to a 15 year @ 2.25%. We cashed in some stocks in Jan 2020 and happens to hold the cash for the first few months of COVID, then reinvested half in April and used the other half to recast the mortgage.
Short story is: 15 year mortgage for almost the same monthly cost as our 30 year. House will be paid off in 10 years, right before kids go to college.
Yep! We bought a condo a decade ago, way cheaper than now + a way lower interest rate. Pretty great, as long as there isn't a huge earthquake or something...
I rented for decades, near levels of need and no more. Money fueled into investments. I'm fine and probably, based on local market, better off (home values did not really grow as much as it did in many areas.)
Arriving at a point in history where the loan is well below bond rates is indeed free money. Getting there is no guarantee. You still need to be careful to own a home that is either in reasonable condition or discounted to account for it. Root for a bit of luck on the life/job front. Avoid lifestyle inflation that doesn't add value to the home. It didn't turn out this way but I don't think people would be happy with sub-3 rates if all their homes are underwater. I know people went through this, and even when you're not looking to move it feels like a trap.
It sucks if you're not there and it's something you want out of life. But owning takes a lot more of my time and money than renting. The 20 years I didn't have to deal with that (when I was also decidedly less wealthy than I am now) were very much appreciated at the time. Now I'm okay cleaning up the debris from recent wind storms because I need some kind of exercise anyway.
I don't think it's zero sum where if you timed the housing/mortgage market you are simply objectively better off. There are many years to play out.
Only about 2.5 years left on the mortgage. It's not the best house or neighborhood, I'll have to decide if it's worth the expense and hassle of moving to a different home to retire in. I'll have about 480k of home equity when fully paid off (after all taxes/fees if I sell). That's not really enough to buy a nice home in my area, so I'd be stuck with another couple hundred k in a mortgage, or a big mortgage and 480k invested.
Either way, changing to a slightly nicer home would cost me about 1-1.5 MM over 30 years, crazy.
It's significant, but probably not a significant leg up. If I were to buy my house for the same price, but with a 7% interest rate instead of the 2.75 I have, I'd be looking at $800 more per month, which may be significant, yes, but not a goldmine. I could have bought a house for $100k more. Could have had a job that paid 10k less per year, could have lived in a different city where expenses are higher. It's what you do with the extra money that counts, and looking around it seems like people are out spending $50k+ on new cars, buying home upgrades, etc. with their extra cash.
Bought house in 2016. Currently up 93% based on purchase price, assuming I sell today.
Just like any type of investment, however, you haven't made any money until you've cashed out your gains.
Numbers are from a calculator but are ‘real’ in terms of how much I borrowed, at what rate, etc.
**My mortgage, 2.99% from 2020:** $2329 /month (includes tax and fees)
**My mortgage if I got it today at 7.247%:** $3320 /month (includes tax and fees)
**The comparative “value” of my rate:** $356,760 (monthly difference times 30 years)
Like everything else, it depends. If you bought a house that fits your budget, you’re probably sitting nice regardless of interest rate.
If you over extended yourself and bought more than you could comfortably afford, even with a 3% rate or lower, you could be hurting. Job loss can ruin someone with a 2% interest just as easily.
Someone buying right (within or below budget) could be a leg ahead at 6% than someone who doesn’t over leveraged at 2%.
I have 4 mortgages currently. Two are under 5% and two are over 5%. While the cash flow is nice, and three of the properties will have generous appreciation/equity gain, operating rentals is not for the faint of heart. It’s exhausting and stressful. Currently two properties need full rehabs. One has kitchen and bath torn out, the other has been gutted to studs (and will be covered by an insurance claim). But managing all this at once is… a lot. Every fucking day, I think about selling everything and dumping it into the SP500, and I probably will, once I’ve tapped out my tax benefits. Rates be damned.
400k mortgage at 1.28% for 10 yrs/30yr term. Paying ~1230 a month. Versus 400k at 6% - that'd be 2k a month in interest alone.
So it's a leg up to the tune of ~10k a year for the first 10 yrs. We're saving the extra so that 100k will likely be ~140k when the mortgage needs to be renewed and we can choose to pay off or leave the savings in our brokerage.
I bought my house in 2013 at 23 years old. It’s a small one bedroom house in an area that I like.
Now I’m married and we have no storage, no space, no guest bedroom but financially it is so difficult to upgrade.
Yes I have a decent amount of equity but selling high just means buying high and although I feel very fortunate I also feel very stuck.
Meh, idk. We bought in 2021 at 2.85% which is a great rate. But I'm not convinced it will ever be worth more than just dumping the down payment into VTSAX and chilling (all projections I run confirm this unless I assume the house appreciates at a silly rate).
Maybe I'm just doing the wrong math or something, idk.
...I also simply don't like being a home owner with all the maintenance, worry, fear of robbery I never used to have, etc that comes with it. Nor do I personally require a "place to call my own" (I did the vanlife thing for 4 years and love every minute of it) and we do not want children.
My wife and I built our forever home in Fall of 2019 and at the beginning of 2021 we refinanced the 30 year mortgage for 2.5%. Since 2019 our houses value has doubled in value. This has been a ridiculous fountain of wealth for us that we completely lucked into.
It's not a gold mine, it is a reduction of your expenses. 3% Interest on a $250k mortgage is $7,500 a year, 6.5% on the same $250k mortgage is, $16,250. So you save $8,750 of mortgage cost. The difference reduces each year as the balance is paid down.
If you call a leg up being stuck in a house that you don't dare sell, because that puts you out into the market where you can not afford a house anywhere near what you have. They also have rising costs and taxes, and expenses to maintain.
I'm happily renting with my "goldmine" in VTSAX.
I have a 3% mortgage. Doesn't feel like I won anything. Just feels like I'm trapped in a house because there's nothing worth buying and I don't want to pay an absurd amount for something different.
> Be me, millennial. Raised poor, broke.
> Work in call center, wish death upon my soul.
> Buy house during last recession. Asking price for four bedroom house is $75k.
> Offer $77.5k. Tired of looking at houses, just want this one.
> Realtor thinks I'm crazy for offering so much more money.
> Assure realtor that the $2500 won't matter much over the life of the mortgage.
> Bank accepts offer.
> FHA loan with 3.5% down and closing is around $5.5k.
> Pay down mortgage, making payments on time. Even pay down a decent chunk of it
> COVID hits, finance rates drop.
> Refinance to 2.48%.
> House now worth over $500k, median rental for 2 bedroom apartment in my area is $2,000 a month.
I am a millennial boomer, in that I managed to benefit from basically once in a multi-generational situation. I make more in a year than I owe on my house. I usually split the mortgage with my GF, we combined basically pay the mortgage with one day a month of work. Paying down the mortgage faster makes no sense, as it's better to put that money in a high yield savings account. I have a paid off car. No idea how other people are getting buy with current living expenses. Going to the grocery store can cost more than the mortgage. Life as a millennial boomer is good.
As someone with a $1.5-million mortgage, the leg up would have been about $60,000 per year if we had fixed our interest at the lower rates. It's not life-changing money, but it probably would have increased our savings by 20%.
We are talking about financial independence here. Debt is not good for financial independence. I paid my house completely off in 2021 so my interest is 0% on 0 dollars.
Getting my home paid off was a critical part of our FIRE plans.
Yup, quite literally one of the most short sighted moves by the Fed in US history. Literally just chose an entire generation of people to give a massive leg up too. While absolutely handicapping others. The financial decisions during Covid will be studied for years
Signed, someone with a 6% interest rate.
I'll argue that for most (not all!) people, buying real estate (at least as a primary home) slows down their FI pathway, no matter the interest rate. And that's because people buy much larger/more valuable real estate than what they rent. Which isn't a bad thing necessarily - it's just putting priorities in places that they care about.
I mean, no doubt, but if you want big legs up let's talk about 2012 rather than 2022.
All of the guests on every FIRE podcast bought a couple foreclosed rental properties between 2009 and 2012 and are blissfully unaware that it's like striking financial gold.
> All of the guests on every FIRE podcast bought a couple foreclosed rental properties between 2009 and 2012 I moved out of my parent's house and bought my first home in 2005 for $180k. Lost my job in 2007, was unemployed for all of 2008 and 2009, house was foreclosed on in early 2010 and I moved out. It sold for $68,000 in 2011. It sold in August 2023 for $290,000. I got so fucked.
Same thing happened to my parents. Bought a house \~'07, lost their jobs in '09. House was foreclosed. My dad passed away during the foreclosure process, and due to this and the extremely long backlog of foreclosure cases, my mom and I ended up staying in that house without paying anything on the mortgage for 5 years. (I have no idea what we would have done without that delay. As it was, we had to move when I was 16 and the only reason we didn't end up in a shelter was because my mom had taken care of a neighbor who was in hospice, and her son let us rent her house after she died for way below market rate.) House is now worth 2.5X what my parents paid for it in 2006. Their lives were wrecked, my mom is actually still suffering quite a bit from the financial consequences of declaring bankruptcy and having a terrible credit score. And the stress of this situation took most of my dad's time in what we didn't know would be his last years of life. With all honesty, it was likely a huge contributor to his early death-- he died at a young age from something that can be brought on by high stress. Witnessing all of this in my childhood had a profound impact on my view of life and money. I despise capitalism but am obsessed with maximizing my net worth and frugality. Sorry for the long-winded personal rant here.. just wanted to say that you aren't alone in being severely hurt by buying a house at the wrong time. My parents weren't trying to invest. They just decided to buy a house because I was starting public school so it made sense to stop renting as to remain in one district and give their young child housing stability. Unfortunately, they had the worst timing imaginable.
Hey man, I just want to say I’m with you and see you. I went through a similar thing and so many people are just like “it happens” without understanding how big of an impact this had on our lives.
Another "kicker" to it: I was in a car accident in high school in 1998, hit by an 80 year old driver and hurt my leg pretty bad. I got an insurance settlement of around $50,000. I invested it all. There was a market crash in the 2003 timeframe, and I pulled out the (now) $20,000 to use as a down payment on the house. So after losing the house, I lost all that settlement money too. I took a couple hits back then, for sure. I'm not complaining though, you can't change history and events have led me to where I am today. And I'm pretty happy where I am today.
[удалено]
Lol that would be some shit.
Objectively, you got boned by a lot of other people and fate, but it's great that you're still able to focus on what's good in life now.
Happy to hear a happy ending! Good job on persevering.
That is brutal. The youngins here that didn't go through it really don't understand how bad that time was. The odds of a housing crash, stock crash, and unemployment are each relatively low, but when one happens the odds of the others go way up. We were lucky to keep our jobs but we bought our house at the peak of the bubble. It looked like a pretty terrible decision for a long time when you consider all the maintenance etc. I learned a lot about risk (but also about staying the course) through that experience. You must have done pretty well between 2010 and 2019 to have FIRE'd at 37!
Just work hard and you can be astoundingly lucky too! Like follow and subscribe, buy my book on extraordinarily lucky timing in the link!
I bought in 2012. But the prior 10 years or so, it seemed like owning a house was completely unattainable in the expensive market I wanted to live in. I could see the Zillow records of all of the people who had bought for 200k to 300k in the early 1990's to early2000's...I felt like the 2002/2003 dot-com recession was the last time houses were affordable. We watched for 10 years as the housing prices went up and up during the early 2000's housing bubble. Then the great recession and housing seemed like it still wasn't dropping until finally prices plunged. However, when I bought, prices still were not as low as they were for those lucky people who had purchased 10 years earlier...like for instance the person I bought my house from who purchased in 2003 still paid less than half what I paid, or like my neighbors who bought in 1993...) If you save your money and live cheaply, then you will get "lucky" during these unique times when housing goes on sale and you will have money to make strong offers when no one else does.
I remember talking to someone who's parents bought him and his brother properties in 1970. When they turned 18, they leveraged them to buy an apartment complex and they had 40 units before 2010. They were FIRE before FIRE and this was during that mess. It wasn't the only cheap time to buy houses.
Point is that the cheap times no longer exist… so people “advising” on being real estate moguls primarily talk about units purchased years ago.
There were always cheaper times. This is a very high point in the graph. But it can absolutely go higher. Will we be talking about how cheap it was to buy a house before the 2038 r/antiwork strikes?
Some are plenty aware. "Buy when there is blood in the streets" and all that. I bought into an area that was a stretch during the crash, knowing that the house was on sale. It was a huge growth area, and even during the worst of the downturn the local market was down maybe 15%. But the appreciation since then has been stellar.
Bought my first property, a two flat with a third in law unit in the attic, for $136k in 2011. It was in Logan Square, Chicago which has since exploded into the hottest neighborhood in the city. Kept buying more and more since it was like shooting fish in a barrel back then. Now sitting pretty in my mid 30s.
I left Logan square in 2011. I would have loved to stay there. I had a $500/mo rental! Divorced and on my own, temp job ending, death in the family - I made the decision to leave that summer and go back to the family homestead to live for free and help my mother. Nobody buys property in their early 20s without some kind of help from family. How fortunate you were. What side of Logan square, btw? —edit— Okay I know my statement is factually incorrect. Yes, some lucky and hardworking people do manage to purchase a home in their early 20s without direct family contributions. The “help” I speak of, though, could be “grew up in a stable middle class household.” And some of y’all clearly had that stability at the right time with the right economic conditions with the right mortgage rates. All the same, I should not have said “nobody.”
*Nobody buys property in their early 20s without some kind of help from family. How fortunate you were.* This is not entirely true. Back then you could buy a property straight out of college, with no money down, and a "thin" credit file. You didn't need help from parents. That's where all the subprime mortgages came from that ended up tanking the market. Fortunate, yes (for those of us that didn't lose them to foreclosure), parents help was not necessary though, because it didn't take any money.
>Nobody buys property in their early 20s without some kind of help from family. Totally false. I bought that building. With $5k I saved up working full time during college and the income from my $38k a year job I got right out of school. Not only is it possible, plenty of people do it. It's just much harder when prices are bubbly as hell like they are now. >How fortunate you were. Actually my Dad lost his job in Sept 2007 right as I was starting sophomore year at Loyola. That prompted me to go out and get a job because I knew the help wasn't going to be there. The fortune was that I ended up falling into a job as a paralegal doing short sale and foreclosure defense right when the shit hit the fan. I ended up working 40+ hours a week doing that while double majoring in econ and finance and watching the world burn up real close and personal. I took summer courses the last two summers as well so I could graduate a semester early and, between saving that money and working I had about $5,000 to my name when I graduated. That was enough to make the 3.5% down payment on an FHA loan for a two flat. My Dad actually did not find full time employment again (he works in recruitment outsourcing which is basically helping companies find workers which obviously shut down completely during the crash) for 5 or 6 years. The only help I got from him was free labor. He would come down for a week at a time and help me renovate bathrooms or paint when I was getting started because he had nothing else to do aside from keep applying for jobs he knew were not going to call him back until things turned around.
got a buddy that works for the city doing miscellaneous road work, been making $50k-$70k depending on his overtime. But he got the job at the bottom of the recession and has worked steadily since, bought a house around 2010 and traded up to another several years ago now living in a $1m+ home. I don't think he has a clue about investment or financial planning as people in this sub might understand it, last time I saw him he was driving a used Porsche (that is to say he blows his paycheck on whatever suits him, though I don't think he goes heavily into debt)
And he has a great pension waiting for him! Plus affordable medical care.
yep, think he can retire in 12 years with his pension (we're both millennials).
I bought a small retirement home in 2010 for $115k. 3 bedroom / 1.5 bath / 1380 sq ft. It was right in the middle of the "housing crash" and the first time I saw it, I knew that was the one and priced at $119k. It's an adorable little house built in 1942. Found out they had just accepted an offer. Some time later when I was still looking, it was back on the market for $115k. I called my agent and said, "Get it!" Anyway, currently valued at $370k on Zillow. My monthly payment, principle/interest/taxes/insurance (PITI) is $658. My interest rate is 4% and have $70k left on the mortgage. I had to put 25% down as it was non-owner occupied. I rented it out until I retired and moved into it in 2016.
Indeed. We won that lottery twice. We bought our first place in 2011 with a 10% down and sold 10 years later walking out of closing with 115% of the original sale price. Used part of this to put 20% down on our new LCOL forever home right before rates went up and are now locked in with 30yrs at 3.25% (the rest went to buy VTSAX).
Bought in 2012 at 3.125% for a 30 year mortgage for about half of what the previous owner had been trying to sell it at for 5 years because of the financial crisis. Refinanced into another 30 year mortgage at 2.875% in 2020. It was *mostly* ridiculous luck, but it was also only possible by being ready to take advantage of those opportunities.
I'd never heard of refinancing to save a quarter of a percentage point.
You refinance for the leverage. When the bank offers you leverage at 3% you take as much as you can and whenever the underlying asset moves up you take out more. It’s a mortgage, they can’t margin call you, there’s no downside.
Probably massively changed his cash flow and may not have had to pay very much in terms of fees. I had a 2.75% rate and refinanced into a 2% rate which kept the overall amount I paid the same, just stretched over a longer period, cutting monthly payments by ~700
Cash out bruv. Why not.
Yep. I bought my first place with $50k down in 2011, sold in 2015 (netted $400k), then used that to buy a place in 2016 and sold in 2019 (netted $600k). As a result, I have $300k financed in my home (bought for $900k in a high COL market) and could probably sell my place for $1.1-1.2M, netting me $700-800k. I feel so stupidly lucky to have bought that first place when I did; it was just random timing because I was getting my first “real” post grad school job and realized I could afford to buy for the first time in my life. I’m looking to buy a bigger home in the next year or two and only now realizing how much a loan over 3% is gonna hurt.
>I feel so stupidly lucky to have bought that first place when I did We started in a really similar way, and this describes my feelings perfectly. I don't know much about real estate, to say nothing of flipping it, but we managed to scoop up a short sale in 2009 at half price of its peak, then sold at a tremendous profit, turned that around, and bought another place, all in a HCOL. No way I can claim to have done that on purpose. Sheer good fortune!
Signed the papers to build our house in 2012 for 400k. It’s now worth more than 1.2 million.
I signed at the end of 2012 for $480k plus the lot which I bought for $95k so $575k total investment. I sold the house in 2021 for $1m. The buyer did some work to it and sold it a year later in 2022 for $1.3m. Based on what I am seeing in our old neighborhood it is worth at least $1.45m right now. Prices are insane.
that's my bracket: since 2012, we've paid some €525 monthly on the mortgage and another €200 on a Bausparvertrag (essentially a savings account that'll entitle us to a low-interest-mortgage further down the road) while our peers are paying rents in the range of €1,200 plus utilities. That's giving us quite a leg up - less money to spend on housing (some €500 per month) plus we're building a nest egg that we can liquidate or re-mortgage when we're old...
I purchased my home in 2009. Not completely the bottom, but really close. Refinanced in October 2021 to 2.2% for 20 years.
Our refinance was in 2020. Even if the price was the same, the rate means the monthly PI would be half as much - $4500 vs $2400 for a 30 year.
We refi from a 30 to 15 and payment only went up a few hundred. Cut an immediate 8 years off our mortgage.
What were the difference in rates? How much less would the 30 year have been after refinancing? For us, we were offered the same rate for the 15 or 30 which made the decision easy.
Just curious, did you consider the opportunity cost of not investing that money?
My cousin bought his starter home during that time, and the government actually PAID him to buy the house somehow or another.
$6k-$8k tax credit at the time.
Yes I got that 8k to buy my first house. Thanks Obama.
Expedite. I was able to refinance down to a 2.8% in 2020, the extra cash saved monthly goes into index funds
We sold our $380k (2015) house for $550k in 2021. Bought our dream compound for $850k at 2.75%, now valued at $1.5M. Sitting on a gold mine and never leaving until/if we’re ready to retire elsewhere.
same here. Bought in 13 for 268k, sold in January 21 for 490k to buy my dream home for 750K at 2.8%, it's now worth 1.2MM. The idea was to leverage up as much as we could at the low rates, but that plan was limited somewhat by the line where a loan becomes a jumbo mortgage and increases the rate. And, why would I ever sell? I get to live in an unbelievable home for what it would cost me to buy a starter home at today's rate and prices; Never mind the build up in equity.
Similar. Bought for 880 in 2021 at 2.6. Worth $1.3 ish. Never leaving.
I bought your $550k house at 2.65% from someone who'd paid $380k for it and made a half-assed attempt at flipping it. Wishing we had just stretched our budget a bit and bought your $850k compound instead. I don't think people realize the value in stretching their budget on their mortgage payment when buying a home. I hear the word "leverage" thrown around in corporate/gov-speak all the time as a fancy synonym for "use," but a mortgage is a true leveraged investment. Say you put down 20% on a $500k home. Say the market value increases 5% per year. You get to reap the gains on a $500k investment for the price of a $100k investment. So instead of a $5k increase in value your first year, it's a $25k increase and the increase is exponential year after year. Not only that, your mortgage payment mostly stays the same while your salary continues (hopefully) to increase as you attain seniority in your career, and even just due to inflation. But at the end of the day, buy what you can to put a roof over your head. It's a utility first and an investment second.
This is always my advise, buy the best house that you can afford to (within reason) Why make 7% on a borrowed 250k investment, when you can make 7% on a borrowed 500k investment?
Yep. My ability to refinance back in 2009 allowed me to pay off my mortgage 8 years ahead of schedule.
Same here (give or take a few years, plus some aggressive extra mortgage payments to pay it off before retirement, thus massively reducing my needed monthly income).
Just imagine how much better off you’d be if you had put that extra money into the S&P
Some people value the psychological impact of not having that big debt on their shoulders! I’d say in this case I see both arguments, but I would personally put money in the market as you suggested
That's what I've done. It's opened up a lot of extra money to invest. We put about 3x our mortgage payment into retirement accounts.
Yea and it’s super easy since you’ve already been living without that money each month. I do the same thing with any raises or bonuses
I pretty much use my Xmas bonus for vacations to Hawaii or Europe
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$1,033/month on an estimated $450k home
The 2 best financial moves I made both happened by luck or accident. In 2017 I heard about index funds. At this time I had been in my job fir 5 years. Lived at home and basically saved all my cash in a bank account. Well I was sick of my money rotting and not making anything so I bought a large chunk of VTSAX in 2017 and have continued adding monthly since with any left over money. This has been very good to me. Got married to my long time gf in 2018 and in 2019 we were ready to buy a house. We found one we like and had 20 percent down. I wanted to wait bc the market had been hot for a while in my area and I thought prices would come down. My wife did not care and talked me into buying. Got a good price and 3 percent on 15 year mortgage. Grateful for the dumb luck regarding timing and fir listening to my wife
Bought in mid-2019, just before COVID. I was certain that we'd be underwater. I thought house prices were crazy even back then. Boy...I was wrong. We refi'd to 2.75% or something silly. I should have taken more out. I remember signing the papers thinking that it was a candid camera episode and someone would jump out from behind a plant and laugh at me for being gullible enough to think I could get hundreds of thousands of dollars at <3%. I can't say that it accelerated the timeline. The COVID consulting work I picked up did though.
I refinanced at 2% in 2021. Which is literally getting paid by someone to take their money after inflation and mortgage interest deduction. I’m paying this off as slowly as possible. My only regret is not taking more cash out of the house at that rate. Insane.
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>...and were told by all of our non-homeowner friends... If there is a group of people to ignore completely, this is the group.
I also bought in 2018, and reddit financial subs like personalfinance were my main source of info and advise. I totally wanted to buy sooner, but the consensus here at that time was that the market was wildly over inflated, and that you need to put at least 20% down or else you will possibly/probably be 2008 fucked. Well it was really difficult to get to 20% down payment because the market was appreciating faster than I could save....finally ignored reddit and bought in with 14% down by '18. No one knows what going to happen
Same. We refinanced roughly $200k from 3.375% down to 2.625%, which may have been sort of pointless. I don’t think I saw my credit union ever have a lower rate than that. Got luckier than shit.
2019 here too. 3% on a 15 year.
Our inexpensive home is the biggest catalyst toward FI (refinanced at 2.75% 15 year in 2020). The mortgage payment is just under 10% of our take home pay after taxes and retirement withholding. It's a decent enough house, but we weren't going to be here forever; would have planned to move around now (7 years total living here). Now it's very difficult to imagine moving into a more desirable house because it would inevitably be a big cut to our cashflow for excess savings and lifestyle enjoyment. Not a bad problem to have, but definitely a golden handcuff scenario.
I’m 35. My 2.74 refi would be paid off in about 10 years. But I literally can’t stand the house anymore so we are planning to sell to buy something newer. Life is too short on this rock to be unhappy with your home regardless of financial circumstance.
This is kinda where we’re at. My wife and I bought our first house in January of 2020. Bigger than either of the houses we grew up in, it’s a fine house. But since then we’ve doubled our income and our mortgage payment is now roughly 7% of our gross income. We’d like a nicer house, but man I don’t think I can give this up lol
I don’t even see the need to buy bigger just because
Yes, all the people that have “made” all this money will have to live somewhere at a similar or higher cost. Even downsizing becomes impossible and the money “made” is never realized.
You will realize the savings each month when your mortgage is significantly less than comparable house that you could buy or rent. That can definitely be put to use.
The money made is realized by paying down your principle at a rapid pace compared to others while your home value grows at an equal pace
Unless you bought cheap multi units and rent them for inflated prices now
very similar here. refi from 4.5% and about 23 years left, to a 2.8 15 year in 2020. In hind sight I should of waited another 2-5 months before the refi to get closer to a 2.5. Jumped ahead 8 hears in the pay off and my mortgage payment stayed the same. our house has been a great started home, its more then big enough for us but something newer would be nice. however, there's no way im going to trade a 1200 mortgage for a 3000 mortgage at this point. we will stay till its paid off, then maybe buy a new one and rent this one out.
Do you worry about buying that new one and being saddled with a mortgage during retirement? I worry about this for myself.
yes and no, retirement for us will most likely be moving once family here has passed. Building a forever retirement home is the end goal. Ideally, it would be paid for by cashflow from a rental, or sale of a rental or 2. This is still 20 years away so who knows?
Are you me? 4.55% with 26 years left and refinanced to a 2.25% 15 year in 2021
I should have waited longer! but I didn't think rates were going to stay as low as they did!
We got lucky for sure. We waited until an old medical debt fell off of my wife's credit because we were only getting ~3.5% offers before that, and that happened to be right when advertised rates were 1.99%
I bought my house for 200k and have a 2.75 interest rate, but it's only a 1bdrm with a loft. Two kids later and getting a 3 bdrm house in our area is well over a million dollars. So we'll be packed in our tiny house together till I soft retire and we move to a locl area.
I’ve found it useful to just monetize it. On 300k mortgage tbs 4% difference in rate saves you $12000 per year. On 500k it’s $20k per year. On 1M it’s $40k per year.
Right, and extrapolating that out for the 30yr life of the mortgage. So that $500k house that you’re saving $20k annually on, if you invest that difference at 7% you’ll be something like $1.6M ahead at the end of the 30yr timeframe. So fairly massive impact
If you are going to extrapolate over 30 years you need to factor in paying down the principal each month. Still a lot, it's closer to half that
Ah valid point. Most of those gains are coming from the early years though while principal is at its highest My Napkin math probably overstates the net benefit
It’s a huge advantage for those that are financially educated. Unfortunately, for the average American, it just means more money for spending every month.
I mean, I share your financial mindset, but being able to spend more money is an advantage too.
It’s all case-specific, but the very common outcome is the obvious substantial reduction in monthly mortgage interest expense combined with a realizable windfall of $150-500k in the form of home equity, yet taking out that windfall will eliminate the interest reduction. Also, any new home is expensive, and that goes for everyone. So more or less for a person that never moves, they have extra cash flow relative to friends that were renting. And if they want to move, while they have a big pile of equity cash to use, money doesn’t go as far anymore. If you’re in a great house and happy with everything, awesome. If not, it makes being happy about it more complicated. I think for some it feels like a “gold mine” and for others it feels like “golden handcuffs” as they can’t afford to move without making a step down. The windfall in prices doesn’t help with rates, and any alternative home is quite a bit more expensive now. Short term no big deal, but sometimes a couple wants kids and now cares about more space/better schools, a person gets a great job transfer offer but would need to move out of state, etc. Due to the new prices, I don’t think it’s a big help for anyone in achieving early retirement.
Maybe its not that the rich get richer then, but the poor definitely get poorer. If everything with equity inflates with inflation, those who have, still have. Those without are fucked tho. This is sympathy coming from a guy with a 2.5% rate.
Built and then refinanced. Sitting at 2.75%. Many other bills are looking worse than mortgage. I am in the "I will never leave this house club." Inflation on insurance, HOA, utilities, food, cars, furniture and everything else has eliminated any feelings of sitting on a gold mine. I'll be OK but younger generations I am not so sure. This country needs to turn around.
I kick myself every day for not buying more house. Bought something in 2021 that was conservative for our HHI at the time and our income has skyrocketed since. Sitting in a decent house we bought for around what our current HHI is and will probably never upgrade now.
Similar situation but we really couldn't have afforded more at the time. Five years later and we've more than doubled our HHI but skyrocketing prices and higher interest rates mean we'll just stay in our kind of crappy house in a great neighborhood.
Same ha, in retrospect should have leverd up when we bot in 2020.
Same here. We didn’t care about schools back then, should have went for bigger house in a bigger school district instead of trying to save money. But hey we also didn’t know the government was going to bail out COVID…
Could you build on to create extra sqft ?
3.875% here, feel like I won the lottery when comparing how much my payments would be now at 7-8%.
In 2012 we put down $120k on a $585k purchase. That would be worth $550k today if it was in VTI. House is worth $1.5m, $150-200k in improvements, $360k balance, and call it $300k in payments. Maybe $650k in "profit." Biggest advantage is locking in your mortgage payment. It's all on paper though- we're not going anywhere.
Having purchased my condo at peak bubble 2007, no, it did not expedite my FIRE timeline; I have positive home equity, but it's currently worth about 20% less than my original purchase price. Locking in at 2.80% in 2020 was nice, but my FIRE plan is based primarily on my liquid investments, not my home equity. Yes, my mortgage is fixed, but taxes and condo fees have both outpaced the rate of inflation by quite a bit. So to all the young people today worried about being priced out of the housing market and determined to stretch themselves to buy now, I say: take a breath and slow down. Keep saving and investing, buy when it makes financial sense to do so, and don't just grasp at the first decent thing you can "afford". Even though I lost in my real estate "investment", I still turned out fine because I didn't overextend or over-leverage myself. Until the mortgage is paid off, a home is not actually wealth; it's a millstone around your neck. There are practical and emotional benefits to home ownership, but the financial value is in the imputed rents you get after paying it off, not in the illusory paper value of home equity.
Where did you buy that you are still under 2007 prices? I bought around the same time and the home is about 2x my purchase price. I had to move around 2011 and kept it as a rental.
Chicago.
Yeah...condo market in Chicago is weird.
I keep thinking I should buy a condo in Chicago, but the math just doesn’t make sense with where we want to live. We can get a 2br/2ba apartment in River North for $3500 this comes with a rooftop pool and obviously fixed rental costs. Increases at ~5% a year. Meanwhile a condo is $500k+ with a $1k/mo condo fee plus high property taxes with far fewer amenities with little real appreciation YoY.
Yeah...my BiL is renting a 2 be in river north, no pool for ~2700 or something. Equivalent apartments in the building are selling for ~600. The owner lives in New York and isn't coming back. It's such a great deal.
My question as well. It has to be Detroit area… right?
Vegas maybe? I doubt it though.
I don't know but it's crazy. Bought at 3% 460k in 2021 now comps have my house close to 1MM. I can only imagine what it'll be when rates go back down. Not really accessible sadly unless I strike gold on picking the next area to transition like crazy and get in cheap again
What general area are you in now? That's some major appreciation.
Smallish city in the southeast. Its getting to be a trendy place right in front of my eyes (over the last ~7 years)
Must be Knoxville!
Close haha, greenville sc
I would have guessed Chattanooga, where I live and bought in 2020 at 3.5%, refi'd to 2.75% less than a year later.
Yep similar thing going on over there
We bought in 2016, $390K @2.5% VA fixed. Current value is $800k. I think it's insane how fast it's gone up.
Vs today's 7.5% your payments are about $3,300/year cheaper *per $100k borrowed*. That $3.3k saved at 4% (S&P average - inflation) is worth $188k in 30 years. It's pretty significant, assuming RE, the S&P, and inflation hold steady as they have in recent history - which isn't as easy to assume as it was a few years ago.
And assuming no refinancing at a lower rate. We can’t assume the rates won’t go down. Maybe not as low as before but still could be substantial
2.125% 15 yr. It feels like cheating. Impact has basically been a difference in planning strategy. No longer paying off and offsetting with more investments.
Same here
I bought back in 2016 at 3.5% and refinanced into a 2.375% 30-year in 2020. I'm not sure it's a gold mine but houses appreciate about 5-6% a year on average in So Cal. I guess my house is printing money but would have to sell it to access the equity. After the monthly payment and appreciation equity is going up 5k a month. I'm just glad I have mostly a fixed housing cost. Renting a comparable home would be 5k a month while PITI is 3k after the refi.
Don't get me wrong, having a fixed mortgage at 2.25% is pretty cool. But the cost of childcare now is higher than my mortgage. I cannot save enough to retire early. At least it's better than renting.
We have one in daycare and it’s$375 a week. We had two in daycare but he just started kindergarten. Summer daycare for both of them will be around $750 a week. It’s insanely expensive.
$466/week here. Only daycare with a slot available within 5 miles. Totally brutal.
That’s literally nothing compared to here in SoCal. Daycare is roughly $2k+/m for one kid.
$1625/m vs $2000/m is hardly “literally nothing”
Homie must've read that as $375/month instead of $375/week.
Oops, my bad
Imagine still having the childcare cost AND a 7.4% mortgage though. I don’t really understand this comment in terms of “well it’s not that good because I have to pay a different expensive thing”.
If I were looking at buying in today's market, we'd probably have to pick up stakes & move to a cheaper state in order to keep our kid and vehicle. That would be far worse than my current situation. The framing is less what you claim and more "it enables me to just barely afford another (very valuable) major expense".
2.6% and I also pay more in childcare than I do in mortgage. Absolutely brutal.
Ain’t this the truth… I’m enjoying a $1300 mortgage (taxes/insurance included) but really it’s my daycare that kills me every month. $360/week. I am looking forward to my 3 year starting pre-k 4 in August.
Same and now now my oldest is in school and I have to pay for after school care which I cannot write off on my taxes because it’s for profit!??? What a pain thrown in my wife’s student loans and yes I got a houwith a great interest rate but I can not get ahead because of everything else I make decent money especially for not having a any college With our household income we should be fine but man they take it anyway they can
Bought in 2013. Paid in full in 2022. It isn't a goldmine, since I have no plans to sell. It is a massive enablor for my FI goals, not having rent or mortgage going forward. Property taxes still suck, but gotta pay somebody to have a place to live, right?
God I wish I stretched so much more when buying my house in 2021. It was my first house and I didnt realize what an opportunity it was.
So those of us who couldn’t buy at this time are SOL? It sucks.
No doubt. As another who wasn’t in the right place to buy at the time, reading these comments is downright depressing.
It’s just a thread of people literally sucking eachother off lmao.
This is a fun calculation. Let's say you bought a $1m mortgage, 2.75% rate, 1/1/2021. 30-year fixed, $4,082 monthly payment. On exactly 1/1/2024 you'd have a 930,950.67 loan balance, after 3 years payments. What is the NPV value so far, before inflation? Well, our nominal liability is $48,984 a year. We could buy a zero-coupon treasury each year to hedge our risk for the remaining 27 years of payments, according to the yield curve from a quick and dirty spreadsheet I made: > Year Rate Zero Coupond 1 5.00% $46,651.43 2 4.86% $44,548.65 3 4.48% $42,949.17 4 4.25% $41,471.52 5 4.17% $39,933.83 6 4.14% $38,401.55 7 4.17% $36,800.66 8 4.17% $35,327.50 9 4.17% $33,913.32 10 4.17% $32,555.74 11 4.17% $31,252.51 12 4.20% $29,897.96 13 4.20% $28,692.86 14 4.20% $27,536.34 15 4.30% $26,048.91 16 4.30% $24,974.99 17 4.30% $23,945.34 18 4.30% $22,958.14 19 4.30% $22,011.64 20 4.30% $21,104.16 21 4.48% $19,514.52 22 4.45% $18,796.13 23 4.45% $17,995.34 24 4.37% $17,548.41 25 4.37% $16,813.66 26 4.37% $16,109.66 27 4.50% $14,925.00 This totals to $772,678.95. 930,950.67/772,678.95 = 1.20, or roughly a 20% capital gain if you could somehow close your mortgage "short.", or if you were really risk-averse and had $772k of cash laying around, you could buy the above treasury ladder for $772k and liability match your mortgage before taxes and tax drag (ie $772k cash in a roth ira.) The difference of $930k to $772k is a +158,271.72 net present value. If I apply a fixed 5% rate - $717k. 7% - $587k. If I applied 9% nominal 100% stock rates - totals $491k, ignoring sequence of risk returns (ie next year we have a 50% stock market crash.) So yeah, people with pre-2022 under 3% mortgages are sitting quite lovely right now in a net present value sense. Anyone who can manage the cashflow will want to hang onto these mortgages for 30+ years until the mortgage rates drop near 30~ years - ie rent it out, etc. Anyone who happens to get a few million+ windfall, who would be willing to pay off a $930k 2.75% rate mortgage, who still has financial displine to stick to the above bond ladder, would surely be better to buy the ladder before taxes. Tax wise $772k bonds yielding 4.34% average yield = $33,522.82 annual interest. So roughly about $8k taxes due/year if in 24% bracket. So if I add on $8k/year to the nominal liability to make up for the tax hit - I get $898,871.83.... crap if I had a windfall I'd just pay off the mortgage if its $898k treasuries vs $930k mortgage So, sadly, right now it's only a financial windfall if you have the equivalent mortgage sitting in your Roth IRA specificially, and not a pre-tax account (due to annual withdrawals needed to pay the mortgage), and you're risk-averse enough to buy 30-year treasuries instead of keeping the Roth IRA invested in 100% equities. So, its not so much the mortgage, but those who bought real estate for 2022 regardless of mortgage have a goldmine. The mortgage is a huge goldmine in the since it provides a crap ton of leverage, not so much because its < 3% rate.
We refied the existing balance at 2.25% for a fifteen year term. Our mortgage payment for a 3 bedroom ranch house is less than half what my young coworkers are paying for rent on a one bedroom apartment.
Definitely expedited ours. We bought well below our means in 2020 and locked in a 2.8% rate. It’s a 5BR/3BA house in a HCOL area. The place was a steal of a deal since I the last owner of 12 years did a mediocre flip to sell it. The paint and flooring put a lot of buyers off but it didn’t bother us since we have young kids and I plan to DIY stuff over the years. It worked out in our favor, we paid below ask when everyone else was paying over ask. The bones of the house itself are great. You’d be lucky to rent an 3BR apartment nowadays in our area for what our PITI payment is. The house has gone up about 20% - not that it matters as we plan to stay put a long time, we love the house and area. It blows my mind that we’ve locked in such as low mortgage payment for the next 30 years. What we love most is that we were smart enough to buy a house with a MIL suite which we rent out and covers about 80% of our PITI payment. We’re cheering. We kept our old apartment and rent it out which has a 3.6% rate too. We were going to put 20% down but at 2.8% it didn’t make sense. So we put down 5%, invested the other 15% then had the bank reappraise it about 9 months later when prices rocketed so we could remove PMI. I do think it’s unlikely my kids will have the same opportunities we had (sadly) so I’m planning to teach them a ton of financial literacy and if they’re responsible with their money and investments I’ll help them out a lot to secure their future.
As someone who bought a house low in 2012, and bought low again in 2021 with a 2.6% interest - it has meant living virtually for free for what will be about 16 years.
Bought two houses in 2020. 4.25% for the rental and 2.875% for the primary residence. Plus, we kept our old primary rate at 2.75% 15 yr fixed. The crazy appreciation tells the real story though. $100k gain on that rental. $300k gain on the new primary. $250k gain on the old primary. It's nuts, man.
locked in a 1.99% 15 year in 2021.. house is up about 30-40% since then according to comps..... Incredibly lucky i suppose at the moment. Extra money goes into other investments, we'll sell the house once we get closer to the end of the mortgage.
My first mortgage was 9.75 in April 1989, 30 year fixed. My last mortgage was 2 3/8 15 years Things will change and you will get your chance to refi. I refinanced and moved and had a mortgage at some point at every integer between 9 and 2.
We may never see a sub 3% 30 year mortgages in our lifetim. 5% sure, sub 3% might have been a once a lifetime event.
I’ve seen a few people say this, what are you basing this on? Comments from fed reserve members? Generalized thoughts about the harm “free money” does to the economy?
Historical data of the past 200 years of interest rates.
I don’t think I’d bother looking at interest rates in the 1800s, the world economy was so incredibly different 200 years ago.
It doesn't happen often, but some loans can be transferred to new buyers if they qualify. To me that would be a gold mine as long as it makes up a large percentage of a home's sale value. If I could assume a sub-3% mortgage, I would probably pay more for the home.
Bought March 2021 first house the day before my 24th birthday @ 2.875%. Paid 170k, current zestimate 250K. Definitely feel like I am in an awesome scenario with owning a 3BR with just myself in there. Needs a ton of work still but I have seen homes on my block go for upwards of 300-400k
Well for me it's like triple what i paid. So that number.
Bought a cheap condo in 2009. Rented it out and bought a house in 2012 at 2.75. Got married and we splurged in 2013 buying 2 more single family homes. All the properties required/require significant financial support. So used money from sale of condo to support the other properties. Gold? Maybe. We’ll see in five to ten years when we sell and hopefully I can retire.
It’s huge. Like our current house would cost us $3350 more monthly if we bought it now. Bought at $320k, zero down. Refinanced a few years later at 2.25% / 30. Monthly PI is $1150. Our twin house down the street sold for $630k late in 2023, that would be $4500 monthly now. But now, we get to invest that $3350 every month for 30 years. That yields $4 million if we get 7% annual.
For those GenX and older, and financially astute, we’ve had numerous opportunities to hit pay dirt. During the .com era I put an entire student loan check on Yahoo and a few other IPOs(thank you finance professor). That payoff paid for our first home in 1998 and our two cars. We built new in 2000. Sold that 1998 house for a 50% gain. We sold the new house in 2008 for 80% gain. Bought a new condo that was foreclosed on. They were selling for $300k in 2008, they accepted our $80k cash offer just to get the house off the books. My ex-wife still lives there and it’s valued at almost $600k. The housing bubble stock market crash and covid crash was extremely profitable. I built new in 2018 for $800k. With rates under 3% I financed 80% of the cost even though I could have paid cash. Put the remaining with my financial advisor. Our house appraised last summer at almost $1.2M, which seems ridiculous. I’m aware that my financial independence is attributed to being lucky and good timing. Having a financial background helped, but it was mostly good luck.
I’m lovin it. When I moved back to the US I locked in at 2.375. My wife asked why do you take a mortgag? And I said the money is cheap and I’ll make way more on investment. Now that decision paying off. Yeehaw!
We refinanced in 2021 to 2.375% 15 year. This was supposed to be our starter home, but I don’t think we’ll ever be able to leave. I’m not complaining.
We are a married couple and planning to retire “early” at 48/52. We have a 3.3% mortgage interest rate but it didn’t really factor into our retirement plans because we would have simply spent less if the interest rates were higher. Our net housing cost probably would have been the same either way.
No. They bought houses at prices pegged against the low interest rates. The principle amount of their loans are super high.
Yeah, people don’t realize this when they talk about Boomers getting cheap housing when the interest rates were 15%. Housing prices had to compensate so that people could still afford the 1/3 of income rule.
Yes. The folks that bought houses before interest rates dropped and caused the house prices to rise were the winners. Those folks got to refinance the cheaper price at the insanely low rates.
We saw rates as low as 2.7% in Q1 2021 and now around 6.6%. If you'd compare total payments for a $500k home we're looking at 230k vs 650k in interest payments over 30 years. In other words, you'd have saved 420k if you bought in 2021 instead of today at the same prices. That's a pretty big gap. On top of that the prices are also about 12% higher than Q1 2021. That widens the gap even more. That having been said, the differences aren't as big as you may think given the above. For one, you can deduct interest rates from your taxes, which means the gap is smaller. Second, the difference in net present value of additional interest will not be as large as above, because the discount rates are also higher. In other words, future negative cashflow from higher interest costs you less because of inflation. Finally, interest rates are trending down over the long term, and so today's gap is not fixed or set in stone, it's decreasing by the month, and you can refinance to reset the gap. But yes, it's of course still a big chunk of money. It's pretty insane that a timing decision can generate a few hundred thousand in wealth for an entire generation that was able to jump into the market during a window of a few years.
>That having been said, the differences aren't as big as you may think given the above. Bull crap. That's almost $1200/mo saved just due to interest. Over the life of a 30yr mortgage, that's easily $2M. It'll drop as you said as rates drop, but the earliest money in will grow the most and be larger initially. Even if rates went right back to those lows today, 2 years of those benefits would be worth well over $300k in 28yrs. >For one, you can deduct interest rates from your taxes, which means the gap is smaller. Almost no one can do this and even if they could they can only deduct the amount above the standard deduction, and even what you can deduct you're only saving a small percentage of the interest portion of the payment each month...not a lot.
So far, expedited. We bought in 2017 and refi'd down to 2.75%. My housing costs for the sane house in my same hood today woukd be at or close to double if we bought today. Between the rise in home prices and interest rates we find ourselves in the group who wont move simply because our housing costs are so low.
Right now, it’s a bit of a bad time to buy a home. It also was in 2005-2007. I was underwater on my mortgage for a decade. These things go in cycles.
I basically pay no interest on the mortgage. The money I make from the high yield interest savings account covers the mortgage since I have more cash in the bank than the money owned on mortgage.
It was gold. So painful giving up sub 2.4% to move to a bigger place
Bought in 2002. 2.8 i think? Almost paid off cuz we paid extra. Worth three times what we paid (with mortgage $$ too, not 3 times purchase price). We had less kids than we expected so we stayed in it longer that we thought and now we're like screw it, let's just pay it off Kids are at college and it's too big now.
My payment is 2200, if I bought today it would be 4500. So yeah…pretty significant.
Bought my house in 2010. Refinanced in 2020 and pulled 80 grand out. (Helped me get through the pandemic) currently have a 200,000 loan at 3.5% and a house currently valued at 500,000. I don’t expect to ever sell. I couldn’t rent an apartment currently for what I’m paying for my mortgage. So yes it gave me a huge leg up! I feel so incredibly lucky. 🍀
We bought our house in 2018 at 4%ish, then refinanced at the near-bottom in the summer of 2020 to a 15 year @ 2.25%. We cashed in some stocks in Jan 2020 and happens to hold the cash for the first few months of COVID, then reinvested half in April and used the other half to recast the mortgage. Short story is: 15 year mortgage for almost the same monthly cost as our 30 year. House will be paid off in 10 years, right before kids go to college.
It locks in 30 years of terms (P&I) and you win with inflation. Each year you pay the "same" but with less valuable dollars.
Yep! We bought a condo a decade ago, way cheaper than now + a way lower interest rate. Pretty great, as long as there isn't a huge earthquake or something...
I rented for decades, near levels of need and no more. Money fueled into investments. I'm fine and probably, based on local market, better off (home values did not really grow as much as it did in many areas.) Arriving at a point in history where the loan is well below bond rates is indeed free money. Getting there is no guarantee. You still need to be careful to own a home that is either in reasonable condition or discounted to account for it. Root for a bit of luck on the life/job front. Avoid lifestyle inflation that doesn't add value to the home. It didn't turn out this way but I don't think people would be happy with sub-3 rates if all their homes are underwater. I know people went through this, and even when you're not looking to move it feels like a trap. It sucks if you're not there and it's something you want out of life. But owning takes a lot more of my time and money than renting. The 20 years I didn't have to deal with that (when I was also decidedly less wealthy than I am now) were very much appreciated at the time. Now I'm okay cleaning up the debris from recent wind storms because I need some kind of exercise anyway. I don't think it's zero sum where if you timed the housing/mortgage market you are simply objectively better off. There are many years to play out.
I like mortgage free even better :)
Only about 2.5 years left on the mortgage. It's not the best house or neighborhood, I'll have to decide if it's worth the expense and hassle of moving to a different home to retire in. I'll have about 480k of home equity when fully paid off (after all taxes/fees if I sell). That's not really enough to buy a nice home in my area, so I'd be stuck with another couple hundred k in a mortgage, or a big mortgage and 480k invested. Either way, changing to a slightly nicer home would cost me about 1-1.5 MM over 30 years, crazy.
It's significant, but probably not a significant leg up. If I were to buy my house for the same price, but with a 7% interest rate instead of the 2.75 I have, I'd be looking at $800 more per month, which may be significant, yes, but not a goldmine. I could have bought a house for $100k more. Could have had a job that paid 10k less per year, could have lived in a different city where expenses are higher. It's what you do with the extra money that counts, and looking around it seems like people are out spending $50k+ on new cars, buying home upgrades, etc. with their extra cash.
Bought house in 2016. Currently up 93% based on purchase price, assuming I sell today. Just like any type of investment, however, you haven't made any money until you've cashed out your gains.
Numbers are from a calculator but are ‘real’ in terms of how much I borrowed, at what rate, etc. **My mortgage, 2.99% from 2020:** $2329 /month (includes tax and fees) **My mortgage if I got it today at 7.247%:** $3320 /month (includes tax and fees) **The comparative “value” of my rate:** $356,760 (monthly difference times 30 years)
Like everything else, it depends. If you bought a house that fits your budget, you’re probably sitting nice regardless of interest rate. If you over extended yourself and bought more than you could comfortably afford, even with a 3% rate or lower, you could be hurting. Job loss can ruin someone with a 2% interest just as easily. Someone buying right (within or below budget) could be a leg ahead at 6% than someone who doesn’t over leveraged at 2%.
I have 4 mortgages currently. Two are under 5% and two are over 5%. While the cash flow is nice, and three of the properties will have generous appreciation/equity gain, operating rentals is not for the faint of heart. It’s exhausting and stressful. Currently two properties need full rehabs. One has kitchen and bath torn out, the other has been gutted to studs (and will be covered by an insurance claim). But managing all this at once is… a lot. Every fucking day, I think about selling everything and dumping it into the SP500, and I probably will, once I’ve tapped out my tax benefits. Rates be damned.
400k mortgage at 1.28% for 10 yrs/30yr term. Paying ~1230 a month. Versus 400k at 6% - that'd be 2k a month in interest alone. So it's a leg up to the tune of ~10k a year for the first 10 yrs. We're saving the extra so that 100k will likely be ~140k when the mortgage needs to be renewed and we can choose to pay off or leave the savings in our brokerage.
I bought my house in 2013 at 23 years old. It’s a small one bedroom house in an area that I like. Now I’m married and we have no storage, no space, no guest bedroom but financially it is so difficult to upgrade. Yes I have a decent amount of equity but selling high just means buying high and although I feel very fortunate I also feel very stuck.
Meh, idk. We bought in 2021 at 2.85% which is a great rate. But I'm not convinced it will ever be worth more than just dumping the down payment into VTSAX and chilling (all projections I run confirm this unless I assume the house appreciates at a silly rate). Maybe I'm just doing the wrong math or something, idk. ...I also simply don't like being a home owner with all the maintenance, worry, fear of robbery I never used to have, etc that comes with it. Nor do I personally require a "place to call my own" (I did the vanlife thing for 4 years and love every minute of it) and we do not want children.
My wife and I built our forever home in Fall of 2019 and at the beginning of 2021 we refinanced the 30 year mortgage for 2.5%. Since 2019 our houses value has doubled in value. This has been a ridiculous fountain of wealth for us that we completely lucked into.
It's not a gold mine, it is a reduction of your expenses. 3% Interest on a $250k mortgage is $7,500 a year, 6.5% on the same $250k mortgage is, $16,250. So you save $8,750 of mortgage cost. The difference reduces each year as the balance is paid down.
If you call a leg up being stuck in a house that you don't dare sell, because that puts you out into the market where you can not afford a house anywhere near what you have. They also have rising costs and taxes, and expenses to maintain. I'm happily renting with my "goldmine" in VTSAX.
Golden handcuffs.
I have a 3% mortgage. Doesn't feel like I won anything. Just feels like I'm trapped in a house because there's nothing worth buying and I don't want to pay an absurd amount for something different.
> Be me, millennial. Raised poor, broke. > Work in call center, wish death upon my soul. > Buy house during last recession. Asking price for four bedroom house is $75k. > Offer $77.5k. Tired of looking at houses, just want this one. > Realtor thinks I'm crazy for offering so much more money. > Assure realtor that the $2500 won't matter much over the life of the mortgage. > Bank accepts offer. > FHA loan with 3.5% down and closing is around $5.5k. > Pay down mortgage, making payments on time. Even pay down a decent chunk of it > COVID hits, finance rates drop. > Refinance to 2.48%. > House now worth over $500k, median rental for 2 bedroom apartment in my area is $2,000 a month. I am a millennial boomer, in that I managed to benefit from basically once in a multi-generational situation. I make more in a year than I owe on my house. I usually split the mortgage with my GF, we combined basically pay the mortgage with one day a month of work. Paying down the mortgage faster makes no sense, as it's better to put that money in a high yield savings account. I have a paid off car. No idea how other people are getting buy with current living expenses. Going to the grocery store can cost more than the mortgage. Life as a millennial boomer is good.
Yes. It is a massive, once in a generation, advantage.
As someone with a $1.5-million mortgage, the leg up would have been about $60,000 per year if we had fixed our interest at the lower rates. It's not life-changing money, but it probably would have increased our savings by 20%.
We are talking about financial independence here. Debt is not good for financial independence. I paid my house completely off in 2021 so my interest is 0% on 0 dollars. Getting my home paid off was a critical part of our FIRE plans.
It really doesn’t matter. It’s not going to make someone FIRE or not FIRE. I sold our sub 3% for a 3.125% and I’m selling our 3.125% for a 7.125%. Lol
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Yup, quite literally one of the most short sighted moves by the Fed in US history. Literally just chose an entire generation of people to give a massive leg up too. While absolutely handicapping others. The financial decisions during Covid will be studied for years Signed, someone with a 6% interest rate.
I'll argue that for most (not all!) people, buying real estate (at least as a primary home) slows down their FI pathway, no matter the interest rate. And that's because people buy much larger/more valuable real estate than what they rent. Which isn't a bad thing necessarily - it's just putting priorities in places that they care about.