Let me tell you a story about why I feel like a dork.
Last night, the family was watching HGTV’s My First Place. This lady was drama filled for what she wanted her first home to have – 42 kitchen cupboards, 3 decks, huge closet, ect… – in downtown Chicago. I do have to admit that her Realtor/friend found some great homes in their price range that almost fit the home buyer’s request to the full for under $400,000. Of course, the potential home buyer did have to lessen her dramatic request to get the house of her dreams. She still came out pretty good.
- $385,500 for 30 years @ 7%
- Monthly Mortgage = $3,100
My son says to the approximate, “if she is paying $3,100 a month for the house she should have it paid in about 10 years”.
“No”, I said. “It’s a 30 year loan with PMI (etc, etc, etc…)”. (“etc, etc, etc…” meaning I don’t really know what I am talking about)
Then I questioned myself. He’s right – it should only be around 10 years if she is paying $385,500 at $3,100 a month.
Questions set in and the calculator came out.
I did the math it didn’t work. (Yes, my husband owns a house but his explanation wasn’t working for me).
So, I hopped on the internet and found what I was looking for at Bankrate – the magic words “% per year”.
I did the math and then I…
$365,500 (home price) * 7% (interest) = $25,585 (interest per year)| $25,585 * 30 years = $767,550 (total interest paid during 30 year loan) | $767,500 + $365,500 (cost of home) = $1,113,050
To buy a $365,500 house actually cost $1,113,500! And then it’s when I realized – I am a Personal Finance Blogger that just got the jist about buying a new home – I feel like a dork
P.S. – dork or not – I am glad that I finally understand the facts about buying a new home before I go spending $1,000,000 of my money!
I am right, right?