Ok, My house was $50,000.00 and my payments are $500.00 a month for 30 years. My truck was $50,000.00 and my payments are $500.00 a month for 5 years. Does anybody else see the problem here? I should be able to pay my house off in 5 years (stupid taxes)
Your truck payments with no interest only add up to $30,000 in 5 years. You clearly didn’t borrow 50K for your truck. And if there are other things included in your house payment beyond principal and interest, you are comparing apples and oranges.
You have a $50,000 truck, you’re paying $500/month for five years? Let’s see… That’s $6,000 per year for five years is only $30,000. Even if you had a zero interest loan, you’d still be short about $20,000 on your truck.
Is your truck a loan or a lease? If it is a lease, at the end of five years, you would either have to give the truck back to the lease holder or pay at least another $20,000 in order to keep it, and that’s without any interest.
And, your house is ONLY $50,000? Where I live, for that amount of money, I could buy the space behind the dumpster at the corner grocer. In fact, I think they were planning some “luxury condos” there before the recession.
It all depends upon your interest rate, down payment, the cost, and the monthly payments. I few percent change in the interest rate can greatly increase your monthly payment. A bigger down payment (I put down 20% on my house) means smaller payments.
Believe it or not, the length of the loan doesn’t make all that much difference. The payments for a 15 year loan aren’t twice the size of a 30 year loan payments even if the interest rates were the same. In fact, I’ve seen 20 year loans that had lower monthly payments than a 30 year loan because the interest rate was a few points cheaper.
What doesn’t make sense is when people don’t understand math.
Ok, My wife just informed me that my truck was around 37, sorry. 50,000 was the MSRP price. And I live in the mountains of PA so my house being 50,000 is average with an acre of land.
Yeah, even if you had no interest your truck payment would have to be around $694/month to pay it off in five years.
At say 5% interest it would be $805/month.
And for a 30-year $50k mortgage to have a $500/month payment on just principal and interest you’re looking at an 11.7% or so interest rate (which is horrible).
So, you’re right. It doesn’t make sense. But not in the way you suggest.
yes, math was NEVER my strong point. I know if you have 10 enemies running at your and you shoot 15 of them, you have less enemies. There is a reason I joined the Infantry.
Even at $37k, assuming you’re paying interest on the loan (and the loan was $37k and not some fraction minus a down payment) you’re still at a monthly payment considerably higher than $500/month. Interest free it is $515/month; at 5% it is $595/month.
My house payments are 560 a month on a 50k loan at 5.9 interest, for 30 years that includes our taxes and insurance. Where do you get 805 a month, and 11%?
Plus, there have to be some more fees in the house payment other than pure principal and interest or you’re paying sky high interest. My payment is less than $300 a month for 30 years for my 50K house, and that’s including taxes (which granted aren’t big at all in Florida.) Perhaps you have PMI, regular house insurance, and/or taxes rolled into the payment?
This is clearly why I do not do the finances at our house. That is my wifes department. I was just asking simply that if they are relatively close in cost and payment, why couldn’t I have the same time to pay them off?
The $805/month is what it would cost to pay off the truck in 5 years if you were paying 5% interest on a $50k loan. Nothing to do with what the house would cost.
11.7% is what the interest rate would be on a $50k 30-year loan to result in a $500 monthly payment. That does not include any other costs rolled into your payment and so inflates the apparent interest rate.
Unless my calculator is wrong, the monthly payment on $50k, 30-years, and principal/interest only would be about $300/month. So if you’re paying $560 there is a lot of stuff in that payment other than minimal principal and interest.
Yes, if the cost and payments were the same the payoff period would be the same. What we’re saying is that the costs and payments aren’t really the same.
They are probably not as relatively close as you think. Take a look at your car loan statement and your mortgage statement. The numbers you want to look at are principal (which will probably be called remaining balance or something like that) and the amount of the payment excluding stuff like insurance and taxes. You would still be paying taxes and insurance even if you paid cash for your house; they have nothing to do with what you are paying to buy the house. They are included in your payment as a convenience.
The actual payment for a 50K loan at 5.9% for 30 years is about $300. If you are paying $560, that is a lot of insurance and taxes.
I have a 50,000 dollar car and pay $444 a month.
Of course that’s because I financed 25k.
One might have a 400,000 dollar home and pay 300/month towards prinicipal and interest. It’s not the value that matters, it’s the am’t borrowed and the number of years to pay it off along with interest rates.
He is, as he’s mentioned at least twice, making a bank payment that includes principal, interest, taxes (fairly high in Pennsylvania, as I recall), and ‘insurance’ (presumably what the bank requires him to have). It’s “the mortgage payment” in everyday parlance, but it includes significantly more than simply what a mortgage-only payment would be.
All I know is if I ever get drafted in the army, I don’t want to be standing next to you.
True. I paid $650 a month with only $420 or so going to P&I. The rest was escrow. I didn’t have to pay for mortgage insurance, but that would’ve been another $40, so that’s a total of $270, or 39% of the payment, not going to the mortgage.
No one will give you a 30 year loan on a truck because it won’t last nearly that long. After ten or fifteen years, your truck would be close to worthless, and you’d have paid off a fraction of the original loan amount.
FEWER! FEWER!
Okay, now that I’ve got that out of my system, my bank thoughtfully provided an amortization schedule of payments for the mortgage we took out last summer. Our mortgage is for five years at 3.89%, amortized over 21 years 11 months* (we don’t get the luxurious, 30 year mortgages that YOU guys get - as far as I know, five years is the maximum term we can get at one time).
At the end of this five year term, we will have paid $77,750. $40,930 of that was applied to interest, and $36,819 was applied to principal. What we learn from this is twofold; first, mortgage payments are applied more to interest than principal early in the mortgage, and two, extra payments that go directly to principal are A GOOD THING.
*We’re on an accelerated payment plan, making bi-weekly payments instead of monthly or twice a month payments, so we pay 26 times a year. This one change has taken years off of our mortgage.
I would say it means you shot 5 of your own guys. :eek: