[jartelt]

The first several years of the mortgage you are paying mostly interest and not as much towards equity. Plus, you have paid closing costs when you bought, will pay 6% to a realtor when you sell, and have paid property tax and homeowners insurance.

If you sell after 5 years, you are only making money if your home value happened to have gone up. This is by no means a guarantee on a short time frame.

[jmvoodoo]

So don't sell. Rent the house, take the income and move on. I'm building house #8 right now and the rent from the other homes (some of which are now paid off) provides an income to my family that would keep them housed and fed should something happen to me.

Of course, you have to consider this when you buy because many homes are terrible investments. If you come in with the view that you're buying what will eventually be an investment property you'll make better buying decisions.

[mrfredward]

I am a few months in to a 15 year mortgage after recently refinanced at a 2.125%. Here's a rough breakdown of where each dollar of my last mortgage payment went:

Principal: 60%

Interest: 22%

Escrow(Taxes + Insurance): 18%

And of course the percentage going to interest only goes down with each passing month. The conventional wisdom that you are paying mostly interest in the beginning a) really only applies to 30 year mortgages, and b) was way more true when interest rates were higher. We're currently near some of the lowest interest rates in history, so interest eats a lot less than it used to.

I'll add that I pay a good bit less on my mortgage than it takes to rent an equivalent place in my area. But yes, paying 6% to realtors when you sell is huge, so you still need to own the house a few years for buying to make sense.

[jartelt]

Yea, you are right about the 2% interest rates changing the breakdown. I was referencing numbers I ran back when rates were 3-4%. That said, most folks still rely on 30 years mortgages!

[mrep]

I got a 30 year fixed at 3% back in march. My first payment had 40.7% going towards principal which is not bad at all in my opinion. Also, I wouldn't count property tax and homeowners insurance as something additional about owning as you are effectively paying that when renting, it is just baked into the rental price. Stupid realtor fees though definitely will bite you in the ass.

[hatch_q]

Interesting. In EU, max interest paid per annuity is 10% and 90% goes to equity.

Also property taxes seem steep in USA.