If you are interested in having an idea what you will be paying for a property based on a range of possible interest rates, below is a chart that breaks down the monthly Principle & Interest payment (excluding insurance, escrow, property taxes…) over the full term of a 30 year loan. Even though most homeowners do not actually carry their 30 year loan the full term (either they sell or refinance before this time), I have taken the time to break down the numbers over 5 year increments. This is a valuable tool to utilize in order to know how much in payments have been made at a particular time of home ownership. For example, say you purchase a house for $1,000,000 at an interest rate of 4%. At the end of 5 years you wish to sell. Assuming the value of the property has increased by 5% each year. At the end of 5 years the house sells for $1,215,000. So the initial cost of the home was $1,000,000, plus after 5 years your paid $155,151 in interest. Figure in the cost to sell your house which we’ll estimate at 9%(~6% listing fees and 3% closing fees). So 9% of the sale price of $1,215,00 equals $109,350. Add the interest paid ($155,151) to the listing and closing costs ($109,350) and that amount comes to $264,501. So if the appreciation of the house increased by $215,000 and the amount of interest paid plus listing and closing costs equal $264,501, then instead of making a gain in the sale of your house, you actually lost ~$49,501, well sort of. Think about this. If you didn’t purchase your home, you would have been renting over the last 5 years. Plus, you are able to write off the interest paid in your federal taxes. For a house of similar size in the same neighborhood, you may have paid ~$3400 a month. To keep things simple, we’ll assume the rent never increased over that 5 year period. The total rent you would have paid would have been $204,000, and even more if the rent increased.
