this post was submitted on 28 Sep 2023
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Interest rates are a big part of it because people who have a mortgage who would consider moving otherwise won't. I'd consider moving, but there's no way I'd trade my sub 3% fixed for nearly 8%.
My house is about 600k. At today's rates I'd pay nearly 1.4 million over the life of the loan. 4k per month. At my current rate I'm paying about half that. For the same house.
This is the reason no one is selling. Everyone who had a mortgage when the rates hit record lows is never going to sell. Why would they. I'd literally be better of keeping this house and renting it out if I wanted to move. Nobody with 2.9% loans is better off walking away from it, it's free money. Inflation is shrinking the value of what I owe, this mortgage is better than cash, and I get a house.
I have significant equity mostly from appreciation. There's no reason I couldn't sell, except that it makes zero sense to give up my current mortgage or to get a new one at today's rates.
This is the problem I have as well. My house is worth 3x what I paid for it, and my monthly payments are… let’s just say I can’t rent a 1br shithole for what I pay monthly for 1500 sqft 3bd 2bath.. (which is also a shithole but it’s mine.)
Even if I sell for the 3x, everything else went up proportionally -and- interest is much higher than the 3.18% rate I got, so I’d be much further behind, and it would be a lateral move, to boot, not an upgrade. Trading the problems I’m aware of for problems I’m not aware of, and paying exorbitantly for the privilege.
Instead, I’m stuck here. Either convince my friend to move in with me, which she’s nearly sold on already, or buying a second property and renting this one out to cover the difference, which I’d rather not do. I hope she takes me up on moving in, not because I need help with the bills, I don’t and don’t really want a roommate, but because she does (she makes barely more than I do, but pays almost 5x as much every month for a quarter of the space in a major metro area rental - she could make half her current wage here and still come out well ahead, but she’d probably make almost the same amount).
It’s being willed to her if I die before her (single, no kids, no plan to change either of those), so anything she puts into improvement she benefits from now and later, even if she moves out. Win-win, and really the only way I’ve found to make this whole thing work decently.
Over the 30 years of the loan if I got a new 30 year mortgage today, for 600k I would pay back about 1.4 million over 30 years.
From 1960 till 2022 the historical inflation rate has been 3.8% per year. If they have a loan for 2.9%, they are inflating away their debt, so the longer it takes to pay, the “cheaper” it gets while they are still getting all the appreciation.