Dream Debt 2: Doubling Down
Definitions
- Purchase Price
- Enter the purchase price of the house, condo, or other domicile of your choice.
- Down Payment
- Enter the down payment for the home.
- Closing Cost
- I don't know how to determine closing cost. I've been told 4000 is a reasonable number.
- Prepaid Cost
- This has something to do with unpaid taxes, and depending on when you buy, could be negative if taxes are paid more than once a year. Just put the same number as closing cost.
- Property Taxes
- You pay this forever now.
- Home Insurance
- Watch out for acts of flying pasta.
- Mortgage Insurance
- "Ok see, we don't think you can afford this loan, so we're gonna charge you extra."
- Term
- You really want to outlive this.
- Mortgage Rate
- Fun fact: every $25/month of mortgage insurance is roughly equivalent to adding 0.1% to the mortgage rate on a $400k home.
- Principal & Interest
- PI = (Purchase Price - Down Payment) × (Mortgage Rate / 12) / (1 - (1 / ((1 + Mortgage Rate / 12) ^ (Term × 12)))). The ratio of P & I changes over time, visualized in the plot above.
- Monthly Payment
- PI + taxes + insurance + insurance.
- Total Paid
- Monthly Payment × Term × 12 + Down Payment + Closing Cost + Prepaid Cost
Disclaimer
This is not an investing tool. Do not use this as an investing tool.