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A Comprehensive Lifetime Comparison: Costs of a $500,000 House vs. a $95,000 Cheap Old House

A Comprehensive Lifetime Comparison: Costs of a $500,000 House vs. a $95,000 Cheap Old House

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.



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