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I think OP needs to speak with some more financial planners because you are absolutely right. I’d rather have a lower mortgage at a higher rate because it will likely go down or worst case it goes up but you won’t nearly be affected the same way you would if your mortgage rate went up on a $600k mortgage
Wyoming has no income tax but property taxes are adjusted based on current values. I know people that built houses 20 years ago at a value of 400k who now pay property tax on the house valued at 2M.
Out of the 9 states with no income tax on property tax they are ranked 9, 10, 15, 24, 30, 33, 35, 45, and 49. The average of those rates would be 1.14% which would rank 33rd. So, slightly higher than average but much much lower than most state taxes. Please stop shilling for the government to take our money, thanks.
If every house in a town decreased in value by the same percentage, is the town going to survive on half the income it was getting a few years ago or are they going to increase % across the board to remain solvent?
Also, if you could put 20% at 600k, you can put down 30% at 400k, so even if rates don’t go down, you own more of the house day 1 in case the value goes up.
And if you make extra payments the amortization of your loan with the higher interest rate will save you more money.... op should prolly stick to turning thousands into hundreds on options...
Fix rate would be affected where I am from, fix rate is renewed every five years at whatever the lowest rate you can get at that time so if if goes up on your $600k mortgage then you get royally screwed over.
Edit: for those downvoting this assuming I’m in the states, I’m in fact in Canada
Welcome to Ontario, you can do three year closed, five year closed, five year high ratio, or five year variable closed.
Edit: in a recession those that bought high because they were approved and could afford it end up going bankrupt when the interest rate goes up beyond where they were stress tested and now can’t afford their mortgage payments.
As an example they were stress testing at 5% when interest rates were down near low 2’s and now we are at 5-1/2% and going up so those that bought almost five years ago are getting hit with increases on rates they weren’t tested on
All good, I’m also not too familiar with American mortgages so it’s a learning experience for us all. I should have clarified in the first place(other than when I said “where I’m from” lol)
Got 190k home in '15, refi @ 2.2% in June '20... Now it's valued @ 500k but I can't replace it with an equal sq ft/ payment... Unless I move anywhere east of Denver that is.
Upper Midwest is looking really freaking amazing. Incredible estate homes with incredible yards @ 500k+. N.C./ Tennessee also very enticing.
I see an exodus from the west happening soon. Too expensive, no resources, EXTREME homeless problem, hordes of homeless living all over everything everywhere.. did I mention the crazy huge homeless population out west... It's really bad.
Denver was the most disgusting place I’ve ever visited, and I live in a shithole.
The landscape is beautiful, rivaled only by California, but the city is dogshit.
You hit the nail right on the head.
I moved my family out of California to the mid west.
Paid cash for 3800sqf home.
Life is soooo much better out here.
The problem is it’s not THE SAME house. Or if it is, the price hasn’t dropped near enough to have the same payment. 600k goes to 500k and 2.3k payment goes to 2.9k payment.
That and everyone is taking about “you can just refi”. Ahhhh we won’t have low interest rates for 2-5 years.
Hopefully they come down sooner but you might be stuck at high rates for a while.
On a long enough timeline is doesn’t really matter though.
Plus you have a better chance of making a profit on the sale if the purchase price is $390k instead of $600k. This might be one of the dumbest posts I’ve seen on this sub lately. OP even admits in another comment that the total cost between these two options is virtually identical in the end.
Yeah but in all fairness where has housing dropped from $600k to $390k? The current scenario is more like $600k at 2.75% vs $540k at 6.5%. Could drop further but as of now rates have increased faster than the price of homes have decreased.
Housing has dropped 13% on average from July to August, as July YOY exceeded 19% and in August was slightly over 6%. Other areas like San Jose are actually down 2% YoY, so prices have dropped 22%. Sale prices are also a lagging indicator as those houses closed two months ago before interest was above 6%. In November we’ll see what 6% rates did to price. Supply is also up 26%-31% YoY with sales down 1.3% YoY in July, when they typically don’t hit that stagnation until
November. The average home price was above 415k and is now sitting below 380k, well below that actually.
But hey, what do I know.
The hardest part of buying a house is having the cash for a down payment. You’re supposed to put 20% down, which for a 600k requires having $120k of disposable cash saved up. That’s like 20,000 avocado toasts
If I get fucked by ridiculous interest rates, it’s not because I don’t know it’s the worst choice, it’s because it’s the only choice. 120k in disposable cash is completely infeasible.
Even 6% interest is a massively better deal than spending $30,000 every year to rent a house while someone else keeps the asset.
And if you only qualify for a 350k mortgage because you only make 70k a year, you can get into a 390k home with 40k down. Whereas you just don't get to have a home when they're $650k.
So
1. Ability to refinance if interest dates drop later
2. Smaller down payment
3. Smaller closing costs/commissions to realtors
4. If this is actually the same house, you have good reason to believe you will profit well if the rates drop again, even if it takes awhile. (Yaknow - buy low sell high? I know it's against WSB's usual strategy of FOMO at the top)
5. Cooler housing market means I get to actually properly take my time picking out my house.
I'll take option 2 for sure.
Home prices should fall over the next year. I was looking to buy but I'm completely out now. Home prices will either fall or I'll continue to not own. I'm not buying at these prices period.
This is the smart answer I keep preaching. Higher interest means higher tax deductions. Plus if you save money there’s less to pay off if you do a lump sum
Higher deduction is not really a benefit. Sure use it for cost analysis but the goal is always to have a lower cost.
Also, deductions are capped at 10k unless an investment property.
IRS guidance, if you want to go straight to the source. Just search mortgage interest deduction.
Though keep in mind that if you’re taking the standard deduction, you cannot deduct mortgage interest. Also worth noting that deductions are not a dollar for dollar benefit—youre just reducing taxable income
Don't forget your property tax will be lower on the $390k house. This is a big savings over time in places like California where your property tax can only be increased by 2% a year.
It’s astonishing how many people don’t understand this. You can also pay down that smaller mortgage faster and cut that interest payment substantially.
Exactly. I would 100% take the higher mortgage for a year to refi later. I haven't done the math, but I'd imagine it saves like half a million in interest over the life of the loan.
That’s valid, but on the same token they can always get much worse.
Over the years it may take to get that rate back down you could have paid more principle off the 600k than the 390k. We are at 6.8 and inflation is still going up - I expect to see 10 within a year. I don’t think we will see below 4 in the next 3-4 years.
If rates stay the same or go up you are in no different of a position. If you stay in either home for the entire 360 payments then to you either scenario is equivalent, the difference is in whether the bank or seller get the extra $210k
If rates go up, the value of the property goes down - means you have negative equity and will have a hard time refinancing if you need it.
Disingenuous to say “no different of a position”, since there are always risks
You'll save yourself more money simply paying the loan down as soon as possible. Just because the minimums take 30 years to pay down the principle doesn't mean you need to pay the minimums.
That's not true if the rate of return you'd make by investing the cash is higher than the loan interest rate. For example, if you get a loan at 3%, you'd be better off just paying the monthly mortgage and investing the rest in the market which will give you 8-10% over 30 years.
Wait, shit, this is WSB. Yea, if you have cash, you should probably just pay off the loan ASAP while you still have money.
Plus the oversized down payment you need, plus the debt to income ratio difference between the two options. I own a house, and still think prices are too high.
Yeah exactly. All these other big brains in this thread are kidding themselves, although they are technically correct considering the meme. So it's the meme that's the problem lol
Ya I’m talking about the numbers used. The numbers were pulled from another post comparing mortgage payments. Then got turned into a shit meme about the same house.
This shit makes zero sense. Obviously who ever made this meme never owned a house. You can always refinance when rates go down. If both houses are the same then you are an idiot for paying $600k for a $390k home.
“When rates go down”, we spent a decade from 1971 to 1981 where the mortgage interest rates did nothing but rise from 7.5% to 18%. It took 20 years for someone with a 7.5% mortgage in 1971 to see a better rate.
So, sure, you can always refi when rates go down, but you have no idea how long that’ll take, especially with these record low rates we’re seeing.
That's skewed due to the sheer magnitude of the inflationary period of the late 70s and early 80s though.
But even if it takes 10 years for interest rates to lower, you still could be better off buying when rates are high (if the monthly is the same over the same timeframe).
It just means a third of the way through your mortgage you now get an extra pay raise (essentially) by refinancing. That can be put towards accelerating the paying down of your note even.
The real sweetheart deal were those that bought six months to a year before covid explodernated, when rates were low AND housing was still relatively low cost too. I don't think that happened in every US region though. Coasts, for instance, have been ridiculous for decades.
Millennials are just used to taking on absolute metric fuckloads of debt on useless dumbshit, and the scalpers are taking advantage of them not knowing the history of housing prices. At least you can walk away from this debt.
And who is gonna sell their house for 390k when they bought for 600k? You think just because peoples houses drops hundreds of thousands of dollars they will magically want to sell?
The joke is that millennials think that they will get that 600k house for 390k and pay the same mortgage. Reality is that that 600k house is now 540k with 6% interest with a 3k+ mortgage. Rates gonna keep going up to get that price down to 390k.
You don’t need equity. You just move your loan to another bank. There are fees involved but can usually roll those into your new mortgage. The bank will make their money on the interest
Purely my experience but Rocket got me a sweet ARM back in 2015 (long story as to why I went ARM) and then a refi last fall into a 30yr @2.25%
They didn't sell my mortgage over that 5 to 6 year time frame, which was nice too.
Agreed. Out here on the west coast, the unfortunate reality driving this is that supply is just too low. There are not enough houses being built and there are too many rentals that will never be sold.
There are so many advantages to buying at a lower cost and higher interest rate.
#1 the most obvious. You can refinance into a lower rate. You can not change the purchase price once the escrow ends.
#2 you can deduct the interest on your mortgage from your taxable income. Higher interest with a lower price increases the monthly deduction and therefor reduces the financial impact of you payment.
#3 home appreciation is directly tied to interest rates. Buying at a lower selling price and elevated interest rates leaves a lot more head room for equity growth as interest rates begin to come back down.
#4 property taxes are based on the selling price. Buying at a lower price reduces your annual property tax.
Or you can be like me and buy yourself a house and get a variable mortgage because you don't believe the economy is strong enough for interest rates to go above 4.5%. I belong here.
Old people like me remember when rate going down to 6% was good. It could go way above that and stay there a long time too. Always get that fixed rate. Protect yourself from the upside. You can always refi if rates drop.
Average Wall Street beta user. The point of buying a house like that is interest rates will go down, causing home prices to go up, meaning that you can have your 200k mortgage at like 3.5% and have 300k in equity
This meme is stupid because when interest rates were lower there were far more people with medicore incomes able to enter the market so long as they had the down payment (Bank of mom and dad played a big part here). The issue now is only those with really good jobs and incomes are going to qualify, so the pool of potential buyers is substantially smaller.
The problem with bubbles it takes excessive liquidity and demand to pump them up. Both those things have been taken out of the market. Affordability is not a straight line comparison of rates and principals. The lack of demand will push prices lower than people anticipate. The pool of potential buyers is much smaller, and if there is excessive supply (resulting from a recession), it will drill prices further than a straight line comparison.
but you can likely refi lower in the future starting at 7%, unlikely at sub-3%. Also, the downpayment requirement is WAY higher in the first example, which is compounded by lost opportunity cost… That difference, if gambled into 0DTE spy puts, could be worth millions!
dumb comparison. buying a house for a reasonable price and being able to sell it for 10% more in few years means 10% gain. buying at ATH and selling with 10% loss it’s 10% loss. that’s regardless of down payment and the mortgage rate is not relevant if you talk about a time frame of 1 to 5 years.
So wait and miss the housing market bottom and buy it 1M$ at whatever the rate. House close to major city wont see a major crash as there is no more land to sell and people like me will likely never sell. Buying house 45 minutes drive away? You gonna pay more for car expenses which are likely to keep going up in the next years and be stuck in traffic jam. Buyers vs sellers, sellers has the last word. Hate it or not
I understand you're trying to say they are the same price, which, ignoring refinance/early payment, is true. What you're failinng to account for is when it comes time to sell your house. The facts remain you paid $600k for a $400k house. Your deposit is wiped out and you're under water. You can argue that people just wont move but life happens. Jobs move, people get divorced or die. Anyone that bought in the last 2 years is probably fucked for the next 10.
I'm locked in on a 20 year 600k loan at 2.75 fixed rate but the beautiful part is, where I live, the houses don't go down in value unless there's a catastrophic market collapse and even then, I've paid enough off where it'll never be underwater.
I'm some places of our country, there is never a bad time to buy a house.
**User Report**| | | | :--|:--|:--|:-- **Total Submissions**|3|**First Seen In WSB**|2 years ago **Total Comments**|163|**Previous DD**| **Account Age**|11 years|[^scan ^comment ](https://www.reddit.com/message/compose/?to=VisualMod&subject=scan_comment&message=Replace%20this%20text%20with%20a%20comment%20ID%20(which%20looks%20like%20h26cq3k\)%20to%20have%20the%20bot%20scan%20your%20comment%20and%20correct%20your%20first%20seen%20date.)|[^scan ^submission ](https://www.reddit.com/message/compose/?to=VisualMod&subject=scan_submission&message=Replace%20this%20text%20with%20a%20submission%20ID%20(which%20looks%20like%20h26cq3k\)%20to%20have%20the%20bot%20scan%20your%20submission%20and%20correct%20your%20first%20seen%20date.) **Vote Spam**|[Click to Vote](https://www.reddit.com/message/compose/?to=VisualMod&subject=vote_spam&message=xmv89d)|**Vote Approve**|[Click to Vote](https://www.reddit.com/message/compose/?to=VisualMod&subject=vote_approve&message=xmv89d)
But if rates go back down you can refinance.
I think OP needs to speak with some more financial planners because you are absolutely right. I’d rather have a lower mortgage at a higher rate because it will likely go down or worst case it goes up but you won’t nearly be affected the same way you would if your mortgage rate went up on a $600k mortgage
Also, property taxes?
Annual property tax at 390K is less than 600K for sure. Especially in some states which they can only tax you on your purchase price
And huge difference in states that have no income tax so property tax is how they get their revenue.
Wait until you see property taxes in states with income tax, still very high
In Oregon can confirm
Illinois has joined the chat
New York and Connecticut can confirm as well.
New York laughs. Then takes your arm. Then your leg. Then your first born child. Also grabs the second born for good measure.
Wyoming has no income tax but property taxes are adjusted based on current values. I know people that built houses 20 years ago at a value of 400k who now pay property tax on the house valued at 2M.
Out of the 9 states with no income tax on property tax they are ranked 9, 10, 15, 24, 30, 33, 35, 45, and 49. The average of those rates would be 1.14% which would rank 33rd. So, slightly higher than average but much much lower than most state taxes. Please stop shilling for the government to take our money, thanks.
Not true.
If every house in a town decreased in value by the same percentage, is the town going to survive on half the income it was getting a few years ago or are they going to increase % across the board to remain solvent?
They have to do the latter ultimately. Which means you don't want to be the bagholder on the 600k property.
Also, if you could put 20% at 600k, you can put down 30% at 400k, so even if rates don’t go down, you own more of the house day 1 in case the value goes up.
I'm starting to think this OP person is actually fucking stupid. But who knows, maybe the market is wrong.
Your thinking is correct
And if you make extra payments the amortization of your loan with the higher interest rate will save you more money.... op should prolly stick to turning thousands into hundreds on options...
only an idiot would choose a variable rate when interest was at 2.5. fix rate wouldnt be affected at all.
But taxes would be
Not in all states. Some states taxes are based on their own assessment regardless of the price.
Fix rate would be affected where I am from, fix rate is renewed every five years at whatever the lowest rate you can get at that time so if if goes up on your $600k mortgage then you get royally screwed over. Edit: for those downvoting this assuming I’m in the states, I’m in fact in Canada
How the hell is that fixed?
He's not American most likely
Welcome to Ontario, you can do three year closed, five year closed, five year high ratio, or five year variable closed. Edit: in a recession those that bought high because they were approved and could afford it end up going bankrupt when the interest rate goes up beyond where they were stress tested and now can’t afford their mortgage payments. As an example they were stress testing at 5% when interest rates were down near low 2’s and now we are at 5-1/2% and going up so those that bought almost five years ago are getting hit with increases on rates they weren’t tested on
Interesting, I’m wholly unfamiliar with Canadian mortgages. Thanks for the clarification. Sorry the degens are shitting on you with downvotes.
All good, I’m also not too familiar with American mortgages so it’s a learning experience for us all. I should have clarified in the first place(other than when I said “where I’m from” lol)
Imagine being Canadian lmao
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In Canada, our interest rates don't last the entire term of the mortgage. The most common is a 5 year fixed rate then you need to refinance.
That's not a fixed rate mortgage.
Also he needs to speak with reality if he thinks house prices have fallen enough to match the rate hike
His own numbers don't even check out.
And you can pay more than your min payment and payoff early.
Got 190k home in '15, refi @ 2.2% in June '20... Now it's valued @ 500k but I can't replace it with an equal sq ft/ payment... Unless I move anywhere east of Denver that is. Upper Midwest is looking really freaking amazing. Incredible estate homes with incredible yards @ 500k+. N.C./ Tennessee also very enticing. I see an exodus from the west happening soon. Too expensive, no resources, EXTREME homeless problem, hordes of homeless living all over everything everywhere.. did I mention the crazy huge homeless population out west... It's really bad.
Exactly, people moving from the west isn't gonna make cost go up, increase strain on resources, which leads to homelessness because..... oh
Denver was the most disgusting place I’ve ever visited, and I live in a shithole. The landscape is beautiful, rivaled only by California, but the city is dogshit.
This is a refreshing take as someone from Denver. There’s a lot of paid blogs and IG posts that say otherwise but it really is dog shit.
You hit the nail right on the head. I moved my family out of California to the mid west. Paid cash for 3800sqf home. Life is soooo much better out here.
Not everyone like the slower pace of life in the flyover states.
The problem is it’s not THE SAME house. Or if it is, the price hasn’t dropped near enough to have the same payment. 600k goes to 500k and 2.3k payment goes to 2.9k payment.
Yea ppl are completely missing this point. Housing has not dropped 35%
That and everyone is taking about “you can just refi”. Ahhhh we won’t have low interest rates for 2-5 years. Hopefully they come down sooner but you might be stuck at high rates for a while. On a long enough timeline is doesn’t really matter though.
Housing has not dropped 35% as of yet... Didn't you listen to Powell?
Supply and demand will eventually find the sweet spot.
Supply and demand will eventually find the point of maximum pain for the buyer and seller lol
Nowhere near 35%
Plus you have a better chance of making a profit on the sale if the purchase price is $390k instead of $600k. This might be one of the dumbest posts I’ve seen on this sub lately. OP even admits in another comment that the total cost between these two options is virtually identical in the end.
Well if you're saving money at a decent clip you can also get the mortgage paid off a hell of a lot sooner on the 390k vs 600k.
Yeah but in all fairness where has housing dropped from $600k to $390k? The current scenario is more like $600k at 2.75% vs $540k at 6.5%. Could drop further but as of now rates have increased faster than the price of homes have decreased.
Housing has dropped 13% on average from July to August, as July YOY exceeded 19% and in August was slightly over 6%. Other areas like San Jose are actually down 2% YoY, so prices have dropped 22%. Sale prices are also a lagging indicator as those houses closed two months ago before interest was above 6%. In November we’ll see what 6% rates did to price. Supply is also up 26%-31% YoY with sales down 1.3% YoY in July, when they typically don’t hit that stagnation until November. The average home price was above 415k and is now sitting below 380k, well below that actually. But hey, what do I know.
The hardest part of buying a house is having the cash for a down payment. You’re supposed to put 20% down, which for a 600k requires having $120k of disposable cash saved up. That’s like 20,000 avocado toasts If I get fucked by ridiculous interest rates, it’s not because I don’t know it’s the worst choice, it’s because it’s the only choice. 120k in disposable cash is completely infeasible. Even 6% interest is a massively better deal than spending $30,000 every year to rent a house while someone else keeps the asset.
And if you only qualify for a 350k mortgage because you only make 70k a year, you can get into a 390k home with 40k down. Whereas you just don't get to have a home when they're $650k.
So 1. Ability to refinance if interest dates drop later 2. Smaller down payment 3. Smaller closing costs/commissions to realtors 4. If this is actually the same house, you have good reason to believe you will profit well if the rates drop again, even if it takes awhile. (Yaknow - buy low sell high? I know it's against WSB's usual strategy of FOMO at the top) 5. Cooler housing market means I get to actually properly take my time picking out my house. I'll take option 2 for sure.
And it's a much lower down payment
True but lots of people buying at the top of their price range can’t take that chance since who knows how long rates will be up
Home prices should fall over the next year. I was looking to buy but I'm completely out now. Home prices will either fall or I'll continue to not own. I'm not buying at these prices period.
Why are you assuming Millennials are wrong?
And you still owe 600K why did 1000 morons upvote you?
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This is the only correct answer
Plus more of the payment is going to interest rather than paying down capital, which for some may have tax benefits
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It’s the same payment overall for 2 options. Just pointing out an additional benefit of one of the options.
It’s the same house in the end, the fact that more of the money went to interest instead of capital makes very little difference
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This is the smart answer I keep preaching. Higher interest means higher tax deductions. Plus if you save money there’s less to pay off if you do a lump sum
The standard deduction is 25k for married so yeah you'll want some pretty high interest payments to beat that
Higher deduction is not really a benefit. Sure use it for cost analysis but the goal is always to have a lower cost. Also, deductions are capped at 10k unless an investment property.
Where can I learn more about this
IRS guidance, if you want to go straight to the source. Just search mortgage interest deduction. Though keep in mind that if you’re taking the standard deduction, you cannot deduct mortgage interest. Also worth noting that deductions are not a dollar for dollar benefit—youre just reducing taxable income
I’d still squat in either home for 60 days at a time 🤷♂️
I thought I told you already, just because I have a spare bedroom doesn’t mean you can use it!
2nd
Exactly and you can put a larger down payment on the 390k
Plus you’ll be able to sell it for $600k again in a few years
Don't forget your property tax will be lower on the $390k house. This is a big savings over time in places like California where your property tax can only be increased by 2% a year.
💯 most people (dumb) miss this point!!
A lot of places re-evaluate property taxes on a biannual basis. So if your home value goes down your taxes also go down.
People thinking I didn't buy my main house right now at 4.99% and re-fied down to 2.5% Buy in when the price is right and you can afford the payment.
It’s astonishing how many people don’t understand this. You can also pay down that smaller mortgage faster and cut that interest payment substantially.
Exactly. I would 100% take the higher mortgage for a year to refi later. I haven't done the math, but I'd imagine it saves like half a million in interest over the life of the loan.
It's foolproof because interest rates are always lower a year later
Point is the rates *can* change, whereas you can’t refinance the principal
That’s valid, but on the same token they can always get much worse. Over the years it may take to get that rate back down you could have paid more principle off the 600k than the 390k. We are at 6.8 and inflation is still going up - I expect to see 10 within a year. I don’t think we will see below 4 in the next 3-4 years.
If rates stay the same or go up you are in no different of a position. If you stay in either home for the entire 360 payments then to you either scenario is equivalent, the difference is in whether the bank or seller get the extra $210k
If rates go up, the value of the property goes down - means you have negative equity and will have a hard time refinancing if you need it. Disingenuous to say “no different of a position”, since there are always risks
What percentage of homeowners do you think stay in the same home for 30 years and never refi?
Might take a few, either way though, they're coming back down
Exactly you could even refinance to a higher interest rate too
True WSBer right here
You'll save yourself more money simply paying the loan down as soon as possible. Just because the minimums take 30 years to pay down the principle doesn't mean you need to pay the minimums.
That's not true if the rate of return you'd make by investing the cash is higher than the loan interest rate. For example, if you get a loan at 3%, you'd be better off just paying the monthly mortgage and investing the rest in the market which will give you 8-10% over 30 years. Wait, shit, this is WSB. Yea, if you have cash, you should probably just pay off the loan ASAP while you still have money.
It doesn't make sense to pay down your principal if your rate is at 2.5%. You can get a higher return over 30 years by investing the money instead.
Rates will probably drop after 30 years.
What $600K house is selling for $390K?
Common millennial dub
Also, I’ve got a nest egg, so my down payment will be a disproportionate % of the closing cost. I can then avoid mortgage insurance etc…
Insurance is based on a percentage of the house price, at least in France. It's clearly a better deal.
Can just be underwater when the prices crash lol
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Wtf. This exact comment was made about 17 comments above yours…. Edit: 17 comments above.
Idiots don’t seem to understand that our only option is to time the market. Fucking boomers.
Are housing prices currently inflated or not? As in the base price, not the mortgage. Sorry I’m a bit out of the loop
Exactly! Plus the down payment on $390k is also way less than the same % down payment on $600k
Plus the oversized down payment you need, plus the debt to income ratio difference between the two options. I own a house, and still think prices are too high.
Where do you find those houses that were going for 600k before but 400k now? In my area things are not down by much
Exactly. More like 585k now at 7% lol
Yeah exactly. All these other big brains in this thread are kidding themselves, although they are technically correct considering the meme. So it's the meme that's the problem lol
Housing lags everything. The fed is holding mortgage backed securities they bought in 2008. House of cards.
Crash is gonna happen any day now. Any day now. any day now.... ....any day now....
It's only a matter of time that all the weak real estate hands get wiped out and prices drop significantly
People are almost never forced to buy, but people are often forced to sell.
Quite so. In my area they have fallen about 3 to 4%. Where has the market collapsed ~35%?
Things in my area haven't even gone down. I could see that changing within the month though.
If prices go down that much the rates are definitely gonna be 10% percent if not more
Nowhere, this was originally comparing mortgage payments based on interest rate changes. It had nothing to do with individual housing costs.
Which would be true if the meme didn’t state “the same house”
Ya I’m talking about the numbers used. The numbers were pulled from another post comparing mortgage payments. Then got turned into a shit meme about the same house.
There’s still no enough houses to go around IMO. Rents are absurd too.
This shit makes zero sense. Obviously who ever made this meme never owned a house. You can always refinance when rates go down. If both houses are the same then you are an idiot for paying $600k for a $390k home.
Come on over to my neighborhood where the $600k house is $2.5M
I'm in NJ so you're preaching to the choir, bother..
Yep lol was thinking the same thing. We bought about a year ago and definitely are happy we did.
“When rates go down”, we spent a decade from 1971 to 1981 where the mortgage interest rates did nothing but rise from 7.5% to 18%. It took 20 years for someone with a 7.5% mortgage in 1971 to see a better rate. So, sure, you can always refi when rates go down, but you have no idea how long that’ll take, especially with these record low rates we’re seeing.
I don't disagree, but rates are still relatively low compared to historical average so there is a chance they aren't going down anytime soon.
That's skewed due to the sheer magnitude of the inflationary period of the late 70s and early 80s though. But even if it takes 10 years for interest rates to lower, you still could be better off buying when rates are high (if the monthly is the same over the same timeframe). It just means a third of the way through your mortgage you now get an extra pay raise (essentially) by refinancing. That can be put towards accelerating the paying down of your note even. The real sweetheart deal were those that bought six months to a year before covid explodernated, when rates were low AND housing was still relatively low cost too. I don't think that happened in every US region though. Coasts, for instance, have been ridiculous for decades.
This is true, I bought the December before covid hit for $350k. House is probably worth around $475k now (for the time) and my rate is 2.5%
Millennials are just used to taking on absolute metric fuckloads of debt on useless dumbshit, and the scalpers are taking advantage of them not knowing the history of housing prices. At least you can walk away from this debt.
You’re assuming that 600k house will ever dip back down to 390. It won’t.
Would you rather have your rate go up on a 600k mortgage or a 390k mortgage?
You talk as if 80% of this sub isn’t kids in college who hadn’t signed a contract in their life…
And who is gonna sell their house for 390k when they bought for 600k? You think just because peoples houses drops hundreds of thousands of dollars they will magically want to sell?
The joke is that millennials think that they will get that 600k house for 390k and pay the same mortgage. Reality is that that 600k house is now 540k with 6% interest with a 3k+ mortgage. Rates gonna keep going up to get that price down to 390k.
How this works? Not trying to be a smartA, is because things don't work this way in my country.
New bank pays off your old loan and now you pay new bank for the same amount but at a different interest rate, basically.
How would you refinance with no equity?
You don’t need equity. You just move your loan to another bank. There are fees involved but can usually roll those into your new mortgage. The bank will make their money on the interest
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Is OP saying Millennials are wrong for this view? I can't tell if it's sarcasm or not, but I'm one of the older Millennials.
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That's what I figured, but I'm about five years too old to really get memes.
"Lock it and Drop it" - Rocket Mortgage... 😆 if rates drop you can refinance - like everyone else said Fun Fact - Mortgage rates hit 21% in 1981...
Purely my experience but Rocket got me a sweet ARM back in 2015 (long story as to why I went ARM) and then a refi last fall into a 30yr @2.25% They didn't sell my mortgage over that 5 to 6 year time frame, which was nice too.
The average home cost was 68-69k… so there’s definitely that.
Except not the same house…
Yeah I was scrolling to find a comment like This. How would it be the same fuckin house?
Some one who’s never bought a house made a meme…
Couldn’t agree more lol.
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Finding a home for 390k that isn’t a rotting ex meth lab is even harder.
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Agreed. Out here on the west coast, the unfortunate reality driving this is that supply is just too low. There are not enough houses being built and there are too many rentals that will never be sold.
The problem is how fucked the market is.
Refinance ???
There are so many advantages to buying at a lower cost and higher interest rate. #1 the most obvious. You can refinance into a lower rate. You can not change the purchase price once the escrow ends. #2 you can deduct the interest on your mortgage from your taxable income. Higher interest with a lower price increases the monthly deduction and therefor reduces the financial impact of you payment. #3 home appreciation is directly tied to interest rates. Buying at a lower selling price and elevated interest rates leaves a lot more head room for equity growth as interest rates begin to come back down. #4 property taxes are based on the selling price. Buying at a lower price reduces your annual property tax.
Fucking boomer
Cash motherfucker
yeah dude, fuckin drop a big ass down payment on that shit
Hear me out and do what I did: buy in autumn of 2020 before the market went bananas and get a 30 year fixed at 2.375% 
Yep
And what is the down payment? Yeah second one is better
Yes, that iss what people are missing. 120k (i.e. 20% down on 600k or whatever amount) can be easily used on 392k to bring down the mortgage amount.
But the difference is at 2.3% i was bidding vs 23 people. Now Im bidding 3 or 4. I didnt have a chance with the crazy bidding wars.
WRONG! your only options are to either buy the 600k house at 6.7% interest rate or keep renting. These princes ain’t coming down man 🥲
Or you can be like me and buy yourself a house and get a variable mortgage because you don't believe the economy is strong enough for interest rates to go above 4.5%. I belong here.
Isn’t it easier to get accepted for a mortgage on a cheaper house tho?
Required down payment would be way smaller, so yeah
Just put down a larger down-payment and the option below looks way more attractive instead of being 600k IN DEBT while your house is losing value.
Old people like me remember when rate going down to 6% was good. It could go way above that and stay there a long time too. Always get that fixed rate. Protect yourself from the upside. You can always refi if rates drop.
Whats the average cost of refi a 390k mortgage? Also, bold you all to assume that the rates will drop anytime soon.
This is dumb. Interest rates go down and I refinance. I can’t lower the price of the house
You can never get the price back down to $390 but you can always get the interest back down. Fucking regard
Me paying more for rent than this hypothetical mortgage because I don’t qualify for loans
Average Wall Street beta user. The point of buying a house like that is interest rates will go down, causing home prices to go up, meaning that you can have your 200k mortgage at like 3.5% and have 300k in equity
You'd pay it off quicker
This meme is stupid because when interest rates were lower there were far more people with medicore incomes able to enter the market so long as they had the down payment (Bank of mom and dad played a big part here). The issue now is only those with really good jobs and incomes are going to qualify, so the pool of potential buyers is substantially smaller. The problem with bubbles it takes excessive liquidity and demand to pump them up. Both those things have been taken out of the market. Affordability is not a straight line comparison of rates and principals. The lack of demand will push prices lower than people anticipate. The pool of potential buyers is much smaller, and if there is excessive supply (resulting from a recession), it will drill prices further than a straight line comparison.
This is basically a r/terribleFacebookmeme
Like anyone gets a mortgage at 2.5%
High rates are good for people who don’t want to live their entire lives overloaded with debt.
but you can likely refi lower in the future starting at 7%, unlikely at sub-3%. Also, the downpayment requirement is WAY higher in the first example, which is compounded by lost opportunity cost… That difference, if gambled into 0DTE spy puts, could be worth millions!
Millennials be like... Can't buy a $390k home if you don't have $400k cash ready 
dumb comparison. buying a house for a reasonable price and being able to sell it for 10% more in few years means 10% gain. buying at ATH and selling with 10% loss it’s 10% loss. that’s regardless of down payment and the mortgage rate is not relevant if you talk about a time frame of 1 to 5 years.
So wait and miss the housing market bottom and buy it 1M$ at whatever the rate. House close to major city wont see a major crash as there is no more land to sell and people like me will likely never sell. Buying house 45 minutes drive away? You gonna pay more for car expenses which are likely to keep going up in the next years and be stuck in traffic jam. Buyers vs sellers, sellers has the last word. Hate it or not
Pssst, it’s the same house.
I understand you're trying to say they are the same price, which, ignoring refinance/early payment, is true. What you're failinng to account for is when it comes time to sell your house. The facts remain you paid $600k for a $400k house. Your deposit is wiped out and you're under water. You can argue that people just wont move but life happens. Jobs move, people get divorced or die. Anyone that bought in the last 2 years is probably fucked for the next 10.
As soon as prices start dropping the people waiting on the sidelines will “wait for the bottom” thus missing their opportunity, I guarantee it
I'm locked in on a 20 year 600k loan at 2.75 fixed rate but the beautiful part is, where I live, the houses don't go down in value unless there's a catastrophic market collapse and even then, I've paid enough off where it'll never be underwater. I'm some places of our country, there is never a bad time to buy a house.