People forget … If you refinance you are essentially selling the house to yourself with the lower rate, but Mr. Taxman will up your taxes to the current market value of your home, which is ridiculously high right now. Any savings in interest goes back into higher taxes. And now you will need more expensive insurance to cover the increase in home value.
This is not how things work in the US. At least not in the states that I’ve lived in: TX, CA, IL.
My current state, TX, regularly updates the property value assessment, so even if I don’t refinance, my property taxes goes up. With homestead exemption, the rise is capped at 10%, but over 2-3 years, it easily catches up to the market value.
But if you’re in CA or NV, that value assessment increase is capped at something like 2% or 1% annually, respectively. (Proposition 13) Creating situations where homes purchased 20 years ago are still paying really low property taxes compared to today’s buyers.
Isn’t that the way it should be? In Florida it’s capped low per year also…you bet the county raises it the max each year. My 95 year old neighbor has a yearly tax bill of 590, mine was 6k. If I stay in my house 50 years, my tax bill will be 1 tenth that of the new owners too.
Its good and bad. I’m conflicted about it, because I think everyone should pay a fair share of the property tax. The person that moved in 20 years ago and the person that moved in yesterday should shoulder the same amount of burden if their properties are equivalent.
But I also think its stupid that my property tax goes up just because some idiot decided to overpay for the house a few houses down the street.
I simply don’t like the idea that the property tax is tied directly to the appraised value of my house. It should really be tied to the size of the land that I am occupying and the total cost of running the city/county that I am in. If I build a fancy shed (insert any structure here) in my backyard, that shouldn’t really cause my taxes to go up even if it increases the value of my property. The only exception is if I change the dwelling type. If it goes from a single family home to a multifamily unit, then definitely the tax rate should be reevaluated, if it is using the infrastructure more.
My wife and I LOVE our house and don’t want to leave, but we definitely thought it was going to be a starter home. We straight up could not afford the mortgage payments anywhere else at today’s rates, even in a much smaller house
I couldn’t afford to buy the house I currently live in, today. The “value” of my house almost doubled in value, and interest rates are close to triple what I have now. There is no way my family is going to move out, it’s pretty stupid that an upgrade of a home, in terms of dollar value, would put me somewhere much smaller.
Its less of a problem of lock in here in Australia. Our rates tend to only be fixed for the first few years. Then you go to the variable rate. We have an opposite problem, where we have what’s known as a mortgage cliff. People who signed up at affordable repayment amounts end that lock in period and have payments jump significantly. Some are forced to sell.
Being locked in seems better than being forced to sell.
Yes, just America was affectednbynthe global financial crisis. Unless you mean the sub prime rates, which ISNA different thing than fixed rates. Usually those on a sub prime rate are on a higher rate not lower.
Here in Germany you can decide how long you want your rates to be fixed, with the tradeoff being that longer times of fixed rates usually have slightly higher rates (in German its Zinsbindung).
I am lucky and happy that I chose to do 30 years fixed rates, after those 30 years I only have like 2k€ left anyway, so it doesnt matter what rates I get then really.
It’s a general problem in real estate now; commercial and residential.
Everyone who was able to refinance to low mortgage rates locked them in. That means that just about anyone who wants to roll over a real estate investment has to take a huge hit in the process. Those rollovers are normally a big part of liquidity and they’ve all dried up.
And people moved away from cities during COVID to decrease their cost of living and get a bigger place while still being able to work from home. They bought with lover interest rates in their mortgage.
Now employers want a return to office. The employees can’t afford to move back.
People don’t live in rural areas primarily because of the distance to their jobs and a lack of infrastructure. Otherwise most people would choose rural living over living in a dense city if all other factors were equal.
Closeness to nature, lack of pollution/ city noise, free use of the earth and land, etc.
I greatly enjoy not having to drive 30 minutes to get groceries or run errands. I very much enjoy dense urban areas where everything is within walking distance or good transit.
Throw in a nice park and some greenery and I’m good. I frankly think most people would pick that than a car centric plot in the middle of nowhere.
For me, it’s not just the closeness of things, but also having a dozen good options for eating takeout, or numerous local coffee roasters or bakeries. I love the idea of living closer to nature on the big island of Hawaii but, it would be rough. To bring the things I love with me I’d also have to roast my own coffee, bake my own bagels and pizza, and brew my own beer. Basically it would be a full time job. I’m happy that these things are still available to me as hobbies, but they are easily outsourced in a real city. And it’s not like you can’t find pizza or beer or coffee on Hawaii, but the quality and variety of those things falls short of what you’d get in a bigger city.
Yep it’s awesome to be free of all the hassles of city life, living out in the woods basically with room to do whatever. The air is clean and fresh, and I can piss in the yard day or night.
Being close to a small town, I can even access groceries and restaurants within 10 minutes. Fiber internet is available and affordable. Wouldn’t trade it for any city.
Yup. Bought at the end of 2019, refinanced in late 2020. Currently have a 15 year mortgage at a fixed 2.1% APR. I literally cannot afford to give this up.
It’s less that I want to leave this house, specifically, and more that I just want out of this state. For multiple reasons unrelated to my good mortgage deal, I’m stuck here for the foreseeable future.
On the bright side, I never thought I’d actually own a house so I’ll take the win.
Bought ours in January 2018 no way could we afford to give it up our refinance no matter 75k in equity. But our mortgage keeps pushing us too. I have click through 6 offers to refinance just pay my mortgage online each month.
Same exact situation. But I has daughters in a state that just upheld a civil war era law enacted to ban abortion prior to women being able to vote. We made a good amount of cash off the sale but now have to rent at almost twice what my mortgage was. Both my house and the Apt. I am in now in are owned by investment firms. This will be untenable.
Ditto. 2.6%. Car loan at 3.2%. Can’t afford a new car, can’t afford to move these days. Yeah, it’s hard to bitch when you’re glad to have a home, but it’s a figurative “house arrest” when market forces trap you.
Yeah, and that’s with a good (mid 700s) credit score.
I had a place try and reel me in at 14% the other day and I would have laughed if I wasn’t so taken aback. Like, they are closer to the maximum rate than the average…
I might just be unlucky with the dealers I have been to. Unfortunately the ones I’ve heard good things about only have cars out of my budget.
Yep, 2.7% here. Bought in summer 2020. I really like the house, but the property is challenging as its a big slope. I didn’t realize all the challenges in dealing with that. However, it’s starting to grow on me and I’m still getting what I want out of my land its… just… more work and money. I got such a good deal it doesn’t make sense to leave.
Same, except for a slightly higher interest rate. My property value has gone up so much and I paid enough down that I could sell and go buy a really nice house in a shitty little town or rural area with cash and have no real bills. I could afford that. I just don’t want to leave the convenience of my city.
So I can’t leave and honestly I really don’t want to yet. I’ll leave when I retire.
I think you may be thinking of an ARM (adjustable rate mortgage) where the bank recalculates the interest rate every few years based on the current federal rate (I’m not a money-ologist, but I think that’s the broad strokes of it).
I pay 2.1% APR until it’s paid off or I choose to refinance again (lol, right). The only thing that changes my monthly payment are the stuff paid from escrow (property taxes and homeowners insurance) since those can vary and the bank takes care of those by folding them into my payment amount.
Nope, US has 15 and 30 year fixed rates available. You can get an arm that has a variable rate, but they’ve been un popular after 2008, and with the low interest rates not worth it.
Holy shit. We don’t have that in Canada. I wish we did. A lot of people have lost their homes due to raising interest rates as they have to renew every 5 years or so. Real estate in Canada is so fucked up.
Not who you were talking to, but no, the closing costs are one time only. You basically just renew or get a new mortgage somewhere else. Ours is coming up in October, we’re a bit worried but hopeful it won’t be too bad. We’ve got wiggle room as we got a great deal on our house but it’s still going to suck. I have seen a 10 year fixed, might go for that if we can get a good enough rate.
Not sure what makes you think this, but most mortgages are a contract for 15 to 30 years that lock you into a rate until the house is paid off. You may be thinking of some kind of variable rate mortgage but I though those renewed the rates way more often than 5 years but I’m not sure. It’ll all depend on the mortgage terms.
The U.S. is the only country in the world where the 30-year fixed rate mortgage is the most popular way that people buy houses. It’s the deliberate result of government policy—government-sponsored enterprises Fannie Mae and Freddie Mac buy mortgages from lenders, ensuring that they continue to offer such loans at little risk to themselves.
30 year fixed rate with a 30 year pay-back period is available in the Netherlands too, but most people take the 20 year fixed rate for a 30 year repay period, because it’s lower interest, and after 20 years, the remaining principal is pretty low.
There are Adjustable Rate Mortgages in the US too. My sister-in-law lost her house a while back where her rate went up. I think they lock you in at a low rate for the first 5 years and then they go up. It sounds like a good idea if you’re confident that rates are going to stay low and your home will increase in value making it easy to refinance. But in reality, no one can predict the market 5 years out, so I wouldn’t recommend it.
Depends on where you live. Odds are most people reading this are in the US or Canada where fixed interest rates for life of the loan is common, though you can get an ARM. However in many other countries you cannot get those loans, and those people have to renew every few years.
In the UK it’s quite unusual to have a fixed rate mortgage that goes that long. Normally you’d get a decent rate for 2-5 years, at which point the rate changes to whatever the current default is, and you get the opportunity to fix for another few years
Well mine isn’t it fix 30 years. You can get one of those our a floating rate but goddamm I was told to only get a fixed 30 year mortgage. Correct that most people do refinance in 5 years but in today’s market no fucking way.
Somehow I think that would be great for un-fucking our “home investment” slave system in the US where landlords buy all these homes on credit, convert them to multifamily, and then use the labor of renters indefinitely while allowing the homes to get worse and worse.
Of course, anything in a bubble without considering how to mitigate effects is going to be a problem. If it was just a single change necessary it would have already been done.
In Canada, the mortgage has to be renewed every 5 years or less depending on your contract. They’ll never let you have a 30 years mortgage on a 2% interest rate the whole time.
In the greater Boston area, rents are much, much less than interest costs on a mortgage.
It’s very common right now to see a rental go on the market only for them to not get a renter and then for the house to be for sale within 6 months. ROI is plummeting compared to other investments but prices stay steady because so many want to buy a home.
I wish there was a map of places where that happens. Not necessarily a cost to rent or cost to own, but a % difference between renting and owning.
In my city, mortgages are about 60-75% the cost of renting.
I think with a large enough sample size a lot of useful inferences could be drawn about how zoning, population density, and local renting laws impact that ratio.
There are condos for boston right now that would rent for 4000-5000/mo (like 2br/2ba) but are listed for sale for 1.35-1.4 million dollars. The mortgage on these things would be like 9k/mo. This is not the common property though, just an extreme example.
I put an offer down on this small multifamily with a total of 4br and 2ba (3br 1ba main unit and 1br 1ba sub unit) and the mortgage was looking like 5k-5.5k/mo with 20% down. Rental for 3br might go for 2400-2800 and a 1br is around 1600-1800. So combined let’s call it 4300/mo for an investor. That’s a $700+/mo lost cash per month assuming you get renters. If you can’t find a renter for that 3BR unit… you’re heavily boned.) It just doesn’t make sense imo. Plus combined in the area I was looking at buying the unit, it has a penalty for non owner occupied property taxes. Plus the 1br unit needed the kitchen floor to be completely redone. I heard an investor at the open house talking about converting the nasty basement into a 3rd unit too.
Also all houses are going for about 10% over asking here, all contingencies except the mortgage one is waived (you must wave inspection. No one is accepting offers contingent on inspection in the suburbs of boston today in 2024.) A great deal many of offers show up waiving mortgage contingency as well, implying cash offers, but the last sellers agent I spoke to suggested waiving that to look like a cash offer and taking the risk of losing your job before the sale closes. It’s fucking wild
If a house doesn’t sell on it’s opening weekend it’s going to get cut every week until it finally goes. Being a greedy seller is really disadvantageous, but being just under value causes bidding wars.
I suspect when rates go down, there will be a new rush for people wanting to change properties. That means new high demand for houses and another jump in valuation.
It will likely never get to 4% again unless there is another major recession or you are willing to get an ARM. Historically, 4% is extremely rare for fixed rate mortgages.
7-8% rates are bad by recent standards but not awful by historical standards. Depending on where I move and how much house I can get, I’d be willing to give up my 2.9% rate for something in that range.
There are a few other factors to consider right now, anyway. I’m a Houston resident, and this is supposed to be a particularly bad hurricane season along with a historic heat wave. My wife is terrified of the state’s newest right wing legislative push, as well. Michigan, Minnesota, and Washington is looking better and better as Texas brains are poisoned by MAGA media. And, despite having a gangbusters growth, my O&G employer decided to cut our bonuses from last year - so I’ve got one eye on the job market again. Our water bill jumped by 9% in a single year. Our interior roadways are falling apart, with no sign that the city or state plans to clean them up or improve access to public transit. HISD is being cannibalized by the governor’s cronies, so I won’t have anywhere to send my kids in a few years.
Would I pay an extra $500/mo to live in a state that isn’t run by pedophiles, bigots, and zealots? Absolutely. Bonus points if it got me out of the concrete jungle and put me in spitting distance of some decent mass transit.
If those are your problems with your area then you might as well just leave the US, we’re not getting mass transit anytime soon, climate change will make weather and necessities more expensive everywhere, and fascists are one lucky election away from bringing forth Gilead
A lot of Texans are thinking about it. My mother is deeply a-political, she retired last year, but she told me a year ago that if I needed to move to the Netherlands she would move to help me. (Her grandparents were dutch immigrants, so she might qualify for citizenship where I wouldn’t.)
Lucky 'mericans. In Canada, fixed mortgages are still renegotiated every 5 years or so, nearly every homeowner with a mortgage is getting wrecked by the interest rates.
Variable rate mortgages and loans are also available. They have not been as popular in the past few years, but when rates were lower, they were more common
This was going to be me but I sold my house after a year because it was the worst town I ever lived in. I’m right back where I was before buying the house, which is better than where I would be next year when my mortgage term was done.
The dropping interest rate is one of the main reasons that housing prices have skyrocketed in the past 20 years. People judge housing prices by what they can afford monthly and interest rates directly impact that figure. It’s only a matter of time for housing prices to fall drastically if interest rates remain at 7%.
And yes, I have a 500k loan at 2.5% on a 30yr fixed mortgage. Maybe we’ll sell our house in 15 years, but otherwise, forget it! I have zero interest in paying it off early.
Actual deflation is unlikely. You might see a kind of stagflation where prices drop relative to real inflation, but an actual widespread drop in home prices has literally occurred once in the past hundred years, and that was in 2008.
Are we like not even allowed to talk about renting out our home in order to upgrade or something? That’s the play right now. Net present value of your almostfree money is maximized by turning it into cashflow. Plus you don’t blow 6% on closing costs, and it’s all the same to the bank in terms of getting another loan. It actually ends up being an equity asset as well as income.
Err, what I meant to say was murder all landlords.
It’s possible, if you have the savings for a second down payment. I’m pretty sure you also lose certain tax advantages if you convert your primary home to an income property. Depending on how long you’ve owned it, that can work out to a serious hit.
You can’t deduct the mortgage interest (you can on the new primary residence though), but suddenly every dollar you spend on the rental property is tax deductible as a business expense. And you can like deduct depreciation on the appliances and shit. It’s actually more tax advantaged in some situations.
Bought my house just before the crash in 2007. Felt screwed over as I went underwater and was stuck with my 6.5% loan while interest rates and home values plummeted (and because my mortgage was privately held, no HARP refi option.
Finally after nearly 15 years not only go out from under water but built enough equity for a no cost refinance. Got into a 2.25% loan.
Sad part is, despite the lower rate, due to skyrocketing insurance and taxes, my payment is no cheaper
Add comment