My partner and I purchased a condo valued at $455k in the Denver area this April. Our combined income recently increased to $160k, which made us feel more comfortable about managing a mortgage. However, with our wedding in September, we could only afford a minimal down payment (3%). We managed to negotiate a couple of seller concessions, one of which is a 2/1 buydown. Our mortgage is structured as a 7-year ARM with a post-buydown interest rate of 7.7%. As I see the days pass, the stress about our increasing payments grows. The excitement of owning our first home is waning, replaced by the frustration of high-interest costs. Despite enjoying the renovations, I’m questioning whether we wouldn’t have been better off renting. Are we responsible for a bad decision here? How should I handle the resentment of missing out on lower interest rates? Is selling in two years a wise move to avoid escalating rates?
Consider the alternative of renting for over $3k per month, which would amount to over $36k a year. Even if you refinance after three years, that’s a significant amount of money to just give away. Keep pushing forward.
@Nico
You make a solid point. Thanks for the boost!
Ori said:
@Nico
You make a solid point. Thanks for the boost!
It’s always daunting at the start, but it does get easier to manage over time.
Ori said:
@Nico
You make a solid point. Thanks for the boost!
It’s always daunting at the start, but it does get easier to manage over time.
Then life’s surprises like divorce, unemployment, children, or unexpected expenses come along… not to mention maintenance and rising insurance costs.
@Shan
While inflation increases, my mortgage remains fixed, which is a huge advantage with my 2.1% rate.
Ori said:
@Nico
You make a solid point. Thanks for the boost!
You secured the rates based on your credit at that time and made the best decision you could. Now, the only decision left is whether to sell or refinance. Don’t dwell on what could have been.
Ori said:
@Nico
You make a solid point. Thanks for the boost!
I purchased my first house in 1989 with a 14% adjustable rate. It was tough to afford and the house value dropped by 10% initially. We just kept paying, and now the house value has increased sevenfold. It’s a rental property now, and the decisions we made back then, tough as they were, turned out to be wise. It might seem difficult now, but holding on could be beneficial.
@Nico
But consider this: $455k at 8% is literally $36k in interest alone each year. Plus, you need to budget for repairs, insurance, property taxes, etc. Even if you refinance in three years, rates could reach 10%!
@Sage
That $36k in interest is tax deductible, effectively making it closer to $28.8k when adjusted for taxes.
Aki said:
@Sage
That $36k in interest is tax deductible, effectively making it closer to $28.8k when adjusted for taxes.
Valid point, but add about $6k in property tax, $2k for repairs, $8k for insurance, and suddenly you’re looking at an additional $20k per year. That’s $56k annually, practically thrown away.
@Sage
Maintenance costs exist, but property taxes are also deductible, and the rate of insurance you mentioned is unusually high. Mortgage ownership offers the advantage of building equity through leveraged investments. Also, consider that renting isn’t just the rent itself; renters’ insurance and other costs add up too. At a 7%+ interest rate, renting might have been more economical, but that equation changes with lower rates. Personally, after doing similar calculations, I found owning to be more advantageous in my situation, even at a 6.8% rate.
@Aki
With current economic indicators, I expect interest rates to rise even further. This could potentially increase home prices as well.
@Sage
It sounds like you’ve cracked the code to living cost-effectively by continuing to rent 
Hart said:
@Sage
It sounds like you’ve cracked the code to living cost-effectively by continuing to rent
My point was about the challenges for new homebuyers. I’ve owned my home outright for a decade.
Aki said:
@Sage
That $36k in interest is tax deductible, effectively making it closer to $28.8k when adjusted for taxes.
Actually, for many people, those deductions aren’t applicable anymore.
@Nico
But isn’t paying interest akin to throwing away money as well? If renting costs less than the interest portion of the mortgage, doesn’t that become the more wasteful option? Perhaps saving more for a larger down payment could provide more equity.
@Milan
When you pay a mortgage, you’re building equity in your own home. Your rent payments, however, go directly to your landlord’s mortgage. So, who is really losing money here, the renter or the homeowner?
@Nico
It’s not entirely a waste. You need to factor in the amount paid in interest in the first few years. As mentioned, most of the payment is currently going towards interest.
@Nico
Don’t forget that owning a condo still involves monthly dues, sometimes as high as $1k. Ownership always has its costs.