You are correct. I purchased my first home in 1981. I put 20% down, assumed a first mortgage at 9.5% interest which represented 1/2 the price of the house and had a second mortgage for the remaining thirty % at an interest rate of 17 1/4%. :eek: Joe.
Because I am paying my mortgage and credit cards now, not in 1982... Are interest rates ever too low if you are a borrower?
Back when, people borrowed $100K, made a down payment, and verified income to carry the loan. Subprimers today borrowed $600K, made no down payment and never had the income to support rates above the teaser rate. The are "all in", levered up to they eyes with no staying power... All of that is different today.
I had a 11.25% loan. It was fun, let me tell you. But the interesting thing is that it was "FHA Assumable". The people who I sold the house to did not even have to qualify! Ah, those were the days...
Mine was 10 1/8% which was good at the time. Of course home values reflected the high rates. The only reason why homes where able to go to the stratosphere was due to the artificially low rates. this is why homes won't appreciate automatically when the inventory problem is gone. There is still the affordability issue. Incomes have to catch up, or prices have to come WAY down (California anyway).
I found an old amortization book in my files from the early 80's, the rate calculation started at 8%! Also found an old real estate investing guide circa 1985, talks about flipping$35,000 multi-family houses. Pretty cool.
Look at the price of homes vs what you made back in the 80âs. There is always that invisible hand in your pocket. It comes in form of high prices or interest rates.