- #51

russ_watters

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From time to time, I like to play with the calculators on sites like this: http://www.mortgage-calc.com/Monique said:What is....

Clicking on the "amortization calculator" and using values of $120k at 6% for 30 years (roughly what my roommate is paying for his 3 bedroom condo) gives $719. a month. His condo fee is about $300 a month. That works out to a toal of $264,153.60 paid for the property, plus $108,000 for services (trash, maintenance, snow removal, lawn care, etc) over 30 years. So assuming no appreciation (there will almost certainly be some) and no inflation (there will certainly be some), in 30 years, he'll own a $120,000 condo and will have flushed $144,153.60 down the toilet (that's the bank's income). He'll have paid an additional $108,000 for services.

The amortization schedule says in your first month, $119 goes to principal and $600 goes to interest. Basically, that's $119 back into his pocket and and $600 down the toilet. It should be noted that if you get a good loan and double-up your payments, every cent of the doubled-up payment goes to principal - it goes straight back into your pocket.

Compare that to renting: My roommate's 3 bedroom condo would go for about $1,000 a month renting (maybe even $1,200). Subtracting out the services ($108,000), over 30 years, that's $252,000, every cent of it straight down the toilet.

Its important to remember thatI agree if you get rid of your mortgage soon, it's a good deal.

Otherwise you're just paying a lot of money without owning anything.

**equity is ownership**(you wouldn't be able to borrow against it later it if it wasn't). If a house is worth $100,000 and you put in a $20,000 down payment, you own 1/5 of a house before you even start making payments. If you suddenly need to sell, you get that money back. From above, his first payment meant he owned $119 more of the house than he did before.

Prices are high and interest rates are low and they typically are opposites of each other. So actually, the total price of a piece of real estate is relatively constant (before appreciation). And again, from the first day, youhouse prices are at its peak, they risk losing value on the house, not owning a brick of it, while having put money into it for years.

**do**own a brick of it - essentially, you are buying the house one brick at a time.

Since a lot can change in the short term, like any investment, owning property is better long term. If you're not planning on keeping a house for more than 5 years, you

**are**gambling on market conditions and yes, it is possible to lose money. But the longer you own it, the less the risk. And again, compare that to renting: with renting, you are

**guaranteed**to lose every cent you put into it.