This is something most people miss.
Just because someone has a fixed rate mortgage it doesn’t mean their cost of ownership can’t increase.
And if other costs do increase it’s identical to having an adjustable rate mortgage.
At some point the owner has to sell. pic.twitter.com/t292RSSmCk
— George Gammon (@GeorgeGammon) June 11, 2024
- Fixed Rate Mortgage and Cost of Ownership:
- A fixed-rate mortgage means that the interest rate remains constant throughout the loan term. Borrowers know exactly how much their monthly payments will be.
- However, the cost of ownership includes more than just the mortgage payment. It also includes property taxes, insurance, maintenance, and other expenses.
- While the mortgage payment remains fixed, other costs (like property taxes or insurance premiums) can increase over time. This can impact the overall cost of ownership.
- Adjustable Rate Mortgage (ARM) Comparison:
- With an adjustable rate mortgage (ARM), the interest rate can change periodically (usually after an initial fixed-rate period).
- If other costs increase while the interest rate on an ARM remains low, the overall cost of ownership could still rise. In this sense, it’s similar to having an ARM.
- Selling the Property:
- Regardless of the type of mortgage, at some point, an owner may need to sell the property. Life circumstances, job changes, or other factors can lead to this decision.
In summary, while a fixed-rate mortgage provides stability in monthly payments, other costs can impact the overall cost of owning a home. And yes, eventually, an owner may choose to sell the property.
I don't think housing can be dislodged from its stagnation without a significant drop in prices nationally. I don't see many analysts pointing out that ownership affordability was already at its lowest level since 2009 BEFORE THE FIRST RATE HIKE in 2022. t.co/xvwXbSBzBs pic.twitter.com/fIjbbI9yYF
— 𝐓𝐗𝐌𝐂 (@TXMCtrades) June 1, 2024