I was chatting with a first time buyer searching for a townhouse in Roslindale today and as we were talking about monthly budgets and how much of a condo she could afford, it got me thinking about when I relocated to the area and enterred the crazy Boston Real Estate market as a condominium buyer and I realized What A Difference A Rate Makes. In this post, I’ll try to quantify this a bit.
Scenario - A buyer wants to buy a $500,000 home with 10% down.
I always defer to Mortgage specialists such as Cheryl Battaglia, Residential Mortgage Consultant with Mortgage Master Inc. - cbattaglia@mortgagemasterinc.com but here is my very overgeneralized take on it: please contact professionals for accurate estimates of your mortgage payments and carrying costs.
In June 2003 at an interest rate of 5.43%, buying a $500,000 home with 10% down = $2,535 / month. This was when the fixed rates were pretty much at their lowest in recent years.
However, back in July 1984 at a peak of 14.75%, that same $500,000 house at 10% down would have cost a whopping $5,600 / month.
Let’s turn this around just a bit and see what similar monthly payments got you then and now.
$2,500 / month : A home buyer with $2,500 / month to spend in 1984 could buy a home worth $225,000. In 2003 that same payment afforded you a home worth $500,000. At today’s rates of approximately 6.4%, your $2,500 gets you a house for $450.000.
$5,600 / month: By the same token, a buyer in 1984 with $5,600 / month could buy a $500,000 house. In 2003, that same payment afforded a purchase of $1,105,000. At today’s rates of approximately 6.4%, your $5,600 gets you a $1,000,000 home.
