What $300,000 buys you these days
By adamg - 6/19/06 - 9:00 am
John Keith shows you what sort of home you can buy for $300,000 in different Boston neighborhoods these days.
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John Keith shows you what sort of home you can buy for $300,000 in different Boston neighborhoods these days.
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let's do some math
By BikerGeek (not verified) - 6/19/06 - 4:51 pm
(The following is not financial or investment advice.)
Okay, so you want to buy a $300k condo. Let's assume you're putting 20% down, through either savings, or a gift from relatives, or inheritance, or winning the lottery, or whatever. That means you're financing $240k. Let us further assume that you're taking out a 30yr fixed-rate mortgage at 6.5% interest (current interest rate from bankrate.com). Running that through the mortgage calculator on bankrate.com, your monthly payment of *just principal and interest* comes to $1516. That figure does not include taxes, insurance, or condo fees. Your payment will also likely be higher if you have less-than-stellar credit and can't get that 6.5% interest rate, or if you don't have that 20% to put down. (And how many people have $60,000 just laying around, anyway?)
Now, look through the classifieds and see what you pay in rent for a place similar to those advertised. There's plenty of stuff for way less than that with a similar number of bedrooms. (I can't speak to the quality of these places; most of the ads don't come with photos.)
If buying a place on a fully-amortizing mortgage isn't cheaper per-month than renting it, then buying it is a bad deal *unless* you expect it to appreciate at a rate significantly greater than the rate of general inflation. *That* in turn is the very definition of speculation.
Purchase prices are starting to slide to the point where they're supported by fundamentals like rents, but they're not there yet.
Another tip: if you can't afford a house without resorting to loans where you don't pay off any of the principal, or that come with substantial "payment shocks" where the loan payment resets to a significantly higher amount a handful of years into the loan term, then *you can't afford the house*, full stop. Rent until you have enough of a down payment saved up to get a house with a more conventional loan. Do NOT buy into the hype that you're going to miss the last train out of the station--the last train out of the station is always the train that wrecks.