Can you elaborate on your last sentence a bit more? Just trying to get a more thorough explanation. I just got my first 30 year mortgage so, trying to make myself feel better I guess.
If you just bought, you don't have a negative real interest rate.
Your interest rate is probably 5% or so?
The real interest rate is probably 3% or so. That means your REAL interest rate is 2%.
When you inevitably get the chance to refinance at below 3% - your REAL interest rate will be negative.
The 30-year fixed mortgage is a product that would not exist without a government guarantee on Fannie & Freddie's debt. Even if you have a jumbo loan - it's only because of the MBS market created by Fannie & Freddie.
In essence, the tax payer is paying you for you to have a mortgage on your house - regardless of whether Fannie securitized your mortgage.
My interest rate is 2.7% - We've been in the house for close to a year now. Renting was going to be 700 more MINUMUM. I couldn't justify not buying but also feel..unsure about everything for obvious reasons.
I'll take a whack at it. You have your mortgage, and let's say the hypothetical payment is $1000/month. That is all you'll ever be obligated to pay each month in order to live in your house (we'll ignore property taxes for the moment). Whereas your neighbor rents her house for $1000/month. But next year her rent is $1050/month, and so on. In ten years, she'll pay on the order of 50% more to stay in that house. But you'll still be paying $1000/month, and will continue to do so for 30 more years.
But that's just how mortgages work, right? Lock into a rate, and have that for 30 years? Only in the U. S., AFAICT. Canadians will correct my details, but as one example in Canada one gets a mortgage for, say, five years at x%. After five years, go renegotiate? (Help me out here, Canucks; as soon as I went to write it out, I knew I had it wrong.) Anyway, point is, the "lock it in at 2.5% for 30 years" seems to be unique to the U. S., and assuming that your wages increase, after a period of years you will keep more money in your pocket than the neighbor that rents.
Your interest rate is probably 5% or so?
The real interest rate is probably 3% or so. That means your REAL interest rate is 2%.
When you inevitably get the chance to refinance at below 3% - your REAL interest rate will be negative.
The 30-year fixed mortgage is a product that would not exist without a government guarantee on Fannie & Freddie's debt. Even if you have a jumbo loan - it's only because of the MBS market created by Fannie & Freddie.
In essence, the tax payer is paying you for you to have a mortgage on your house - regardless of whether Fannie securitized your mortgage.