The decision to buy a house involves considering various financial aspects, including the down payment, amortized interest, and mortgage payment costs. In this blog post, we’ll explore and compare the lifetime costs associated with purchasing a $500,000 house versus a $95,000 cheap old house.

A. $500,000 House:

1. Down Payment Costs:

A common down payment is 20% of the home’s value.

Down payment: $500,000 * 0.20 = $100,000.

2. Amortized Interest:

Assuming a 30-year mortgage with a 3.5% interest rate.

Monthly payment: $1,789.94.

Total interest paid over 30 years: $324,379.50.

3. Mortgage Payment Costs:

Monthly mortgage payment: $1,789.94 * 12 = $21,478.28.

Total payments over 30 years: $21,478.28 * 30 = $644,348.40.

B. $95,000 Cheap Old House:

1. Down Payment Costs:

Assuming the same 20% down payment.

Down payment: $95,000 * 0.20 = $19,000.

2. Amortized Interest:

Assuming the same 30-year mortgage with a 3.5% interest rate.

Monthly payment: $429.91.

Total interest paid over 30 years: $77,368.79.

3. Mortgage Payment Costs:

Monthly mortgage payment: $429.91 * 12 = $5,158.92.

Total payments over 30 years: $5,158.92 * 30 = $154,767.60.

Lifetime Comparison:

1. Total Costs:

$500,000 House: $100,000 (Down Payment) + $324,379.50 (Interest) + $644,348.40 (Payments) = $1,068,727.90.

$95,000 Cheap Old House: $19,000 (Down Payment) + $77,368.79 (Interest) + $154,767.60 (Payments) = $251,136.39.

2. Savings:

Choosing the cheap old house could potentially save $817,591.51 over the lifetime.

Conclusion: While the $500,000 house may offer more amenities and potentially higher appreciation, the $95,000 cheap old house presents a significantly more affordable option over the long term. Consider your financial goals, lifestyle preferences, and priorities when making a decision on which type of property aligns best with your needs.