Re:How Homeownership Became the Engine of American Inequality
by refurb on Tuesday May 09, 2017 @01:19PM
(#14301962)
Sure it does. Think of it this way....
Targeting an all in home payment (principle, interest, insurance, taxes) of 1/3 your $100K income, so $30K or $2,500 per month.
In a world with MID, the ~$1500 in interest payment each month can be paid with pre-tax money. Assume you're in the 30% bracket, that means an extra $450 each month. Now you can afford a mortgage that costs effectively $3000 per month, which comes out to another $50K to $75K in purchase price (rough estimate assuming 4% interest rate).
Targeting an all in home payment (principle, interest, insurance, taxes) of 1/3 your $100K income, so $30K or $2,500 per month.
In a world with MID, the ~$1500 in interest payment each month can be paid with pre-tax money. Assume you're in the 30% bracket, that means an extra $450 each month. Now you can afford a mortgage that costs effectively $3000 per month, which comes out to another $50K to $75K in purchase price (rough estimate assuming 4% interest rate).