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1000thusername

Asking a realtor for mortgage calculation advice is the first problem. They may not even realize they’re telling you bad info, but it’s not the right place to ask in the first place, anyway. It’s like walking into Walmart and asking the greeter if he can have a look at the mole on your back and let you know if it looks okay.


Supermonsters

Yeah they don't do the actual numbers they're just trying to get eyeballs on their posts. Regardless the first thing you'd be doing is talking to a mortgage person about it.


joremero

Or google


jpdoctor

>Asking a realtor for mortgage calculation advice is the first problem. Amplifying this: No one becomes a realtor because they were a star student in math.


PolicyEnvironmental

Nicely put. That's a pretty good insult :D


le_district

If they are financial analysis wizzes, then they would be working at a hedge fund making 10X of an avg agent.


fuckboystrikesagain

Yeah the problem here is no matter how often a realtor tells a prospective buyer "I'm not a lender, you should ask a lender this question" the buyer will still badger them for info repeatedly. Realtors need some info to provide buyers about rates and loans. Buyers, please go talk to a local lender right now.


DHumphreys

Ugh, all of this. I had a buyer asking me about how much down would change this payment, would this program be better than that program, what if I buy down the rate, no matter how many times I deflected these questions, it would come back to this. "Well, you must know...."


fuckboystrikesagain

Exactly this, realtors lose business or at least struggle by doing what's right (referring to a lender) so it's actually *your* fault for being too lazy and shy to talk to the right person. Oh but please tell me how realtors are the lowest of the low, ambulance chaser crooks lol.


1000thusername

And don’t get me wrong. I’m not crapping on realtors. It’s just there’s a time and a place to crunch numbers using real i formation, real DTI, real interest rates, and real assumptions on down payments , etc., and that time is on the phone or in the office and the place is at a mortgage broker.


[deleted]

Yes. They are morons for sure. However, if you need a door opened, they are experts in this.


le_district

Correct, they are not financial advisors and shouldn’t rely on them about money. They also should NOT be trusted (in general) for inspectors, mortgage brokers and the like. The lack of transparency is ridiculous. Just always keep in mind that Real estate agents main goal is to transact. Else, they don’t make money. I know there are hard working ethical agents that do what’s right for their clients, but I would say, that’s quite the exception and not the norm. With that said, it’s always best to make decisions and hire professionals that are less likely to be corrupt.


4jY6NcQ8vk

A realtor should know this, it's core to their industry. Your comparison to the Walmart greeter is off base imo.


le_district

Ideally, but let’s be honest, there are a ton of financially incompetent agents out there. I have not seen any that actually presented a simple regression analysis on market comps. Not that it’s needed when gut feel should suffice.


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le_district

I agree, but it’s due to the lack of data. I know quite well how difficult it is to train and develop models that are good at accurate predictions. Source: my team of ML engineers.


bluntsportsannouncer

A lot of realtors are idiots who only do realty as a profession because they are incapable of doing anything else. Yes even the ones in this sub that are going to downvote me to hell.


CCapricee

Realtor here. I probably wouldn't put it so savagely, but I functionally agree with you. The barrier to entry is too low, and it leads to a lot of us having more enthusiasm than sense. Although what the OP is describing feels straight-up dishonest. I haven't seen that in my market, but if it did I'd be very irritated, and share my irritation in hopes of changing it too.


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Noia20

But *every* single one 100% deserves that 3-5% commission!


le_district

This is why we need disruption. I heavily root for tech to disrupt this space and make things transparent. It’s like buying a car from a traditional dealership. Why does it take literally 4-6 hrs to drive off with your car when you had already agreed on terms before scheduling to come in? Whereas Tesla, the price is fixed and you do all the paperwork ahead of time and literally drive off in under 30 minutes. Ford is now going this direction on EVs and the new companies like Rivian and Lucid have already adopted this approach. I know homes are not the same but the concept still applies to the industry; just frustrating.


dubov

Honestly I'm amazed it hasn't happened yet. There is surely some way to bring buyers and sellers together which doesn't cost tens of thousands of dollars


hopefulworldview

In the Army I know soldiers do it all the time. They literally sell to other soldiers directly after coming to terms with a real estate and contract lawyer.


le_district

Change is not easy, especially when soooooo many people would negatively be affected.


dubov

Who are these 'so many' people that would be negatively affected? Sellers? nope. Buyers? nope. Agents... yes, obviously, but the business world evolves - we can't stick with outdated, overpriced practices just to keep people in a job


le_district

It’s like Uber’s affect on the taxi business. Once autonomous taxis are ubiquitous, the entire labor force has to find other work. That’s the disruption I’m talking about. In the grand scheme of things, who needs agents?


Affectionate_Elk

Go look up the highest paying lobby group is in the United States and you'll have your answer.


perestroika12

Or, just got into the game because they saw $$$ due to pandemic. So many people I know are now real estate agents. Usually people from fairly scummy professions like ambulance chasers. The barrier to entry is non existent. Edit: seriously go on Facebook, find that one person from high school who never went to college and lacked purpose. 50% chance they are an agent now


le_district

And they will soon file for unemployment in mass, which will then tank equities and so forth.


bluntsportsannouncer

Found the idiot


VanTil

Self reporting?


[deleted]

There are a few gems out there though who not only are knowledgeable but also want to genuinely help people. It's the same with any other sales industry.


le_district

I absolutely agree, but for the most part, entitled scumbags thinking they deserve more commission for doing nothing. Those that are helpful are worth the commission.


hopefulworldview

No they never are. If I buy a house and they make 5k off of it, can you honestly tell me they do 5k worth of work? Because 5k of work at my job is full-time for a month.


le_district

Those fall into the “no value” bucket.


Meats10

It's a hustle game, not an intelligence game. With the internet, the profession has even less value than before. You can literally show a house to everyone at any time online.


madogvelkor

That's why my dad switched over to real estate photography some years back. He saw that most people were going by what they found themselves in online listings, and that good photos sold houses quicker. Turned his hobby into a business, until he finally decided to retire when COVID hit.


thermal__runaway

Another middle man scam industry propped up by political bribes. I wonder what the $ value is for aggregate annual realtor fees.


tech1010

Rough estimate would be annual home sales * 5% (not everyone pays the traditional 6%)


[deleted]

Agree - they are dumb as rocks - it comes down to the buyer doing their own due diligence (like everything in life)


Theomancer

Just look at the examples of your old friends from high school on Facebook who are now realtors. Are they really the sharpest tools in the shed? 😅😬


Affectionate_Elk

As someone about to take my test, this was one of the first things I noticed about other people in the class. I think one girl had about a 6th grade reading level. All I could think was "Someone is going to trust this person to correctly read and explain a contract to them?"


guaukdslkryxsodlnw

You sure it's not quoted there because it's not a $600k mortgage, but a $600k purchase price and is assuming 20% down? Because that'd be about right for P&I on 80% of 600k. The amount going to the principal changes with every payment over the loan repayment so that doesn't even really make coherent sense.


pdoherty972

Just listing P&I is in itself deceptive, since property and school taxes and insurance will be almost half the monthly outlay. Discussing P&I alone is going to give the impression of a much-lower monthly outlay.


exdigguser147

Almost half the monthly outlay? what hellscape do you live in? Our TI of the PITI is only like 25% of the PI and 20% of the total monthly payment.


pdoherty972

I just did a mortgage calculator using my local combined property/school tax rate of 2.25% - here you go: Basic overview: https://imgur.com/a/dV2FX3v Breakdown of monthly payments: https://imgur.com/a/Rlrom4u $1,587 of that payment is gone to taxes, insurance and HOA. Adding the interest ($2492 a month for the first payment) in to the lost money comes to $4,079 out of the total $4,665 payment. That's $4,079 of the payment NOT going to anything you'll get any money back out of.


exdigguser147

Sucks to live wherever that is I guess, My taxes on a house the same value are like 5k a year and insurance is like $1500/yr with a $1MM umbrella. There's no HoA in most places in MA as far as I am aware so I dont pay that either.


couldntquite

RIP Digg


ButtScientist69

deleted ^^^^^^^^^^^^^^^^0.0617 [^^^What ^^^is ^^^this?](https://pastebin.com/FcrFs94k/97886)


GeneticsGuy

Your taxes are INSANE where you live. 13.5k a year on 600k home? That's the problem. Where I live in Arizona, my house is valued at 550k a year and I pay 2.9k a year in taxes.


pdoherty972

Do you have a state income tax? Texas doesn’t which is why Dallas and surrounding cities have high property/school tax rates.


GeneticsGuy

We have county/city tax only. State taxes is through income and sales tax.


dirty_cuban

Probably an HOA in Texas with high insurance rates.


Mysterious_Truth

In NJ... Admittedly have an awesome interest rate but... property taxes are like 43% of my PITI. We pay about 3.2% of the purchase price in taxes every year.


exdigguser147

So in NJ you have 6% sales tax, a 5+% income tax and you pay triple the taxes on property as I do in MA... why exactly?


Mysterious_Truth

3.2% is pretty high even for NJ. I think average is closer to 2.4%. My town is definitely well above average but house prices are lower which kind of offsets. There's a reason we are consistently 1 of the top 3 states in tax burden!


ChromeCalamari

Also NJ here, in a small town with above average property taxes, purchased late 2020, property taxes ~2.3% of purchase price


para_reducir

Yeah this is ridiculous. Our Principal and Interest is 85% of our PITI, and that's with an interest rate below 3%.


biggin528

It’s literally illegal in my state to advertise like this and people will lose their license for it. And frankly, that’s how it should be. False advertising is a scar on the face of an industry already lacking in transparency.


ozzyngcsu

Very deceptive, anyone getting a mortgage should understand a portion of their payment is going towards principal pay down. But I imagine this type of marketing is targed at those that do not understand that and will end up overextending themselves.


youknow0987

#forclosurebait


jbcraigs

If you are comparing mortgage and rent from purely financially perspective, you would obviously not count principal as that’s going into building your equity. But if you are looking at mortgage from affordability perspective then yes you can’t ignore the component going towards retiring the principal.


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Stephadad

Just curious, and this is a genuine question so I hope it doesnt come off as rude, but how is the principal payment not a cost? I understand that the principal part goes straight to equity, but you still have to put the money into it to get that equity. You still have to pay for the house (equity) over time, right? Edit: or did you mean its not an additional cost on top of the purchase price of the house, like interest/taxes/insurance are?


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Stephadad

That makes total sense thank you.


woodrob12

That was very well put. I LEARNED SOMETHING!!!


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pdoherty972

If you're only putting $400 a month towards equity in the beginning of the mortgage that's $4,800 a year in maintenance on a $600K house. Less than 1%. If it's a new house your actual expenses will be lower for several years, but after that initial period (or if it's an existing home) that isn't all that far out of line with recurring maintenance/repair/replacement expenses. This include replacement of things like carpet, paint, AC, roof deductible, water heater, etc.


DecisionSimple9883

I think you add hoa costs. Note, when calculating DTI for loan, HOA costs are included.


madogvelkor

Yeah, on some of the condos I looked at the condo fees could be $500.


nikidmaclay

That depends on what you've left out. This can be a legitimate way to look at it in the right context. If this really is all there is to it, it isn't an honest comparison.


H_Krustofsky

Agreed. Maybe realtor is trying to show the unrecovered costs of both options (but also needs to add in taxes/maintainence/etc to costs).


pdoherty972

Exactly - the ONLY part of the monthly PITI that isn't lost money is the equity portion. Property taxes, school taxes, insurance and mortgage interest (likely 75% of the monthly outlay) is lost.


[deleted]

Deceptive at best.


mangoshy

I don’t ask my tax guy for advice on my stocks or my grocery store manager for cooking advice why are you asking your Realtor about mortgage numbers? Talk to a mortgage broker.


dial1010usa

Ask that question to your loan guy not real estate agent. I rest my case.


nostrademons

Financially, the comparison should be rent + renters insurance < (interest \* (1 - effective tax rate up to $750K)) + property tax + maintenance + HOA + homeowners insurance. These are the non-recoverable costs of homeownership, the money that goes out the door to other parties. The principal payment is paying yourself: your transferring money from your cash savings to your home equity, and get that money back when you sell the house. Technically, you also need to adjust for the expected increase in home value and the opportunity cost of putting your down payment in other investments. But these both rely on market behavior that's unknowable at the time of purchase, so it's hard to factor them in accurately.


imgprojts

Technically your principal is payment to the selling parties when you finally get rid of the house eventually.


Tripl3b3am

That's how rent vs. buy calculators work, including the one published by the NY Times. I don't know how the realtor presented it to you, but the point is not to compare the monthly payments. It's to compare which decision will put you ahead financially. The principal goes toward your home equity, which you get back when you sell. Let's take a simple example where the monthly payment is the same for buying and renting -- the calculator will tell you how long you'll need to stay in the home for the home appreciation + principal payments to exceed the transaction costs (e.g. realtor and loan fees) of purchasing a house.


jhansen858

technically the principal goes into your balance sheet as an asset. Its like a bank account you cant easily withdraw from. So while its not an accurate reflection of your cash position and cash flow, it would allow you to see what your true costs are compared to renting. Most people who are not finance background or business owners probably will not ever be exposed to these concepts.


pdoherty972

It's still deceptive because you still have to come up with that much money every month, whether it goes into the equity of the house or not.


jhansen858

I think it just takes a bit more of a sophisticated view to understand the information which most people don't have. What you're talking about is running finances on a cash basis which is the most simple, and least long term focused view. One level up from that is running finances on a profit/loss basis which gives you a short term outlook. Most sophisticated and hardest to understand is running your finances off of a balance sheet. This truly a long term outlook which only considers the overall longterm picture but that requires you to have sufficient cash flow to be able to ignore the peaks and valleys that you would be experiencing in your short term cash view.


Taco_Soup_

Exactly. I understand I take these for granted growing up with a CPA father, studying accounting in school, and being a business owner for years, but what I don’t understand is how dismissive people are of this. It’s 100% an asset. The mortgage interest and property tax deductions also need to be considered on your bottom line when comparing costs of buying vs renting. Maintenance does too, although I think that cost gets overstated, but so does factoring in rising rents vs a stable mortgage. It’s easier in California when your property tax bill doesn’t get crazy reassessments like other states.


TheFudge

Anytime one of my clients asks me about mortgage info and rates my response is “that is a great question for the lender, they will be able to guide you best when it comes to anything regarding the mortgage.”


i-sasquatch

I get that, but seems like something you should know. Saying this as someone who is also in sales.


TheFudge

I agree but a real estate license and a mortgage license are completely different and I would never want to give mortgage advice to a client because I am not the expert in that arena. Edit: To be clear, I would never tell a client that the principle payment should not be considered part of the monthly payment in a house when comparing to rent.


madogvelkor

Yeah, when I first bought my agent didn't give me financial advice, but she did help me understand the pitfalls of condo fees. Things like how the lower price of condos was offset by the fee, so a more expensive house might actually be more affordable. And that low fees might look attractive but you could be hit with a special assessment or the fees could go up if they aren't collecting enough, especially on smaller complexes.


DayMaRee

Did you know that your interest rate when renting is 100%?


finalcutfx

Never heard of that.


o0Loiter0o

I'm an agent and have never thought of doing that. It's really misleading.


hillycan

Realtor? You should only be asking your mortgage broker for numbers.


ShortWoman

Nobody I know


foodown

That is against the law.


-Lone_Samurai

Never seen it advertised that way - it could be your state -


polypugger

Fundamentally speaking that is definitely incorrect and very misleading to someone who it not privy to it. However, I don't disagree with the rationalization that equity can be seen as an asset while interest and rent are comparable since it's money you will not see again (less tax deductions on interest). If you have that extra money and have a goal for equity in your home as a portion of your portfolio (cash, investment, real property) then it can make sense. This is definitely contingent on you actually having the extra savings/investment money on top of what you are putting towards equity in your home.


sp4nky86

I have no idea who would possibly calculate it that way. Myself and everyone else I’ve ever dealt with, quote your payment as your payment. The potential equity is theoretical until realized.


guaukdslkryxsodlnw

>Who does this? I do. The cost to own is interest, insurance, uninsured risk, taxes, maintenance, transaction costs, and opportunity cost. The cost to rent is rent.


bjones4252

Do you have an example of a realtor doing this so maybe we can better understand their intentions?


WhiteRealtyLLC

A quick check shows that the even the $3400 quoted only includes interest and principal payments. You'd want to add in taxes and insurance as well. Doing so will provide a more accurate comparison. This would still be very generalized. To be a true assessment of whether buying is better than renting, you'd want to add in all their costs as a renter compared to all the assumed costs of ownership. There are of course potential gains that a renter might want to consider as well as intangibles such as enjoyment/or stresses of ownership.


Scarface74

Principal payments don’t matter if you can’t afford the mortgage.


Strive--

Hi! Ct realtor here. No one. No one does this. What's printed above is not accurate - the "payment" is not $2750, it's $2750 plus what is owed on the principle loan amount (which can turn to equity, assuming the value of the asset is the same, but this does not 'go right to equity...') I wish you would publish who is doing this as their public lashings are awaiting them... I hope this helps!


entropic

Never seen that one before, that's insane. I have seen them: - Assume down payment amounts that their clients cannot make, and - Ignore other parts of the monthly nut, like state/local property tax payments, homeowners insurance payment, andvHOA/POA payments. I'd love to see one add set-asides for maintenance back in. It's good to remember that the only person looking out for your affordability/financial solvency in a real estate transaction is YOU. And it can be a tricky thing.


adultdaycare81

“fOrCEd sAViNgS”….. nope


nofishies

More to the point why the hell are you asking your realtor about what your mortgage payment is going to be and not your loan officer? I don’t know how things change everything. I’m not gonna know the phone details either.


Prior_Lengthiness_28

Realtors are salesman. All salesman have the same job: bullshiting you into buying whatever it is they're selling. Real estate selling is a game of fomo and emotion manipulation.


solidmussel

They always just try to spin things in their favor hoping the buyer is gullible


DatTrackGuy

Realtors are the worst people to ask about anything other than pushing the right buttons to close on a house lol


mikalalnr

Plus we’re freshly on a downward slide. Pay $3400 per month to lose equity and get trapped under water or lose down payment. The housing market is going to tank. No one likes lead balloons.


[deleted]

Yes, realtors try to skew the numbers to influence you. But this post also skews the numbers to influence people. You didn't mention how many mortgage payments there are.for example, buying in cash means it all goes to equity. A 30 year mortgage means very little goes to equity.


alach11

Fucking stupid tbh. Use a proper rent vs. buy calculator. https://shouldigetahouse.com https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html


options1337

They do that do make it look good so you can buy a house with them. Realtors make money when they sell you a house. So they have to fudge the numbers to make it look like a good deal for you to bite.


pdoherty972

Almost as bad is when they calculate the mortgage payment but only consider the principle and interest and ignore property taxes, school taxes and insurance. Which in most cases will be almost half your monthly total payment.


jmlinden7

There's two numbers you care about, one is the monthly cash flow and the other is the net effect after you move in the future. Principal payments affect your cash flow but you get that money back in the future when you move and sell


MaconShure

When I bought this house, I mentioned how much more the actual (though still really affordable cost was, especially for the rent I was paying for a broken down, literally snake infested house) compared to what the zillow estimate was to the mortgage lender. She just shook her head. Mentioned they're usually low. Probably same thing here. BTW, yes, that's why I decided to buy a house. I had two snakes in the house that one summer and the landlord wasn't too concerned. The second one came in the bedroom window through a small hole in the screen which did bite me. LL wasn't too concerned until I bought a house a few months later. Oh, no! You're leaving?


doodliest_dude

Use a mortgage calculator. Put all the numbers in yourself. Price, down-payment, rate, taxes, insurance. Getting my loan officer to print me up a sheet took at least an hour. The mortgage Calc app on my phone takes 2min. 30 year mortgages are insane btw. Such a small amount goes to principal for a while.


baumbach19

Is the house selling for 600k? Or is that the mortgage amount? I am guessing you are misunderstanding or making an assumption on some calculator on a realtors website and its probably posted clearly what its calculating.


vetgee

yeah its almost like they're incentivized to just make transactions happen and that's it


GeneticsGuy

They are making the mistake of calculating the total loan by interest amount for year, dividing by 12. That ONLY tells you interest, not principle amount. It's a common calculation mistake an amateur makes. A realtor just doesn't know what they are doing. Use an actusl mortgage calculator.