How does anyone profit on buying a house? The numbers dont make sense.?

Question

If you get a $600,000 loan at 7.5% interest compound yearly. That means you pay $45k a year or $3700/month in interest. After 10 years you end up paying over $450,000 in just interest with still $400,000 owed towards the house. Even with house prices raising 4% a year, you still lost thousand upon thousands of dollars.

Answer 1

Look at it this way... You buy a house that needs some work for 200,000 dollars at 7.5% You invest 40,000 dollars remodeling the house and do it in 2 weeks before the first mortgage payment is due. You hold an open house in 2 weeks and sell the house for 325,000 dollars because of the work done on the house. You make a quick profit of 85,000 dollars. It's called flipping. There are shows on TV about it and many books you can buy. Hope this helps.

Answer 2

First and Foremost:

1. No reason why should be paying 7.5% on a jumbo loan (500K+)

2. If you plan on staying in the home for more than 3 years, I suggest you Refinance

3. Get set up on a Bi-weekly Amortization Schedule, It's Free.
(Example): Instead of paying 1 payment per month; have it set up where you pay 2 payments of $1850. Once on the 15th and then again on the 30th.
*When doing so the first payment on the 15th goes towards Interest and Principle.
*The Second Payment on the 30th of each month goes soley towards the principle; bringing the loan term from 30 years to 23-25 year loan; saving thousands each year on interest.

I hope this was helpful.
Regards,

FinanceYourWay.com

Answer 3

A good friend of mine bought a 2 family in 2002 for 350k. He sold in 2005 for 600k during the boom with 100% financing. He made out big time tax-free. It really does depend on timing. If your value only increases 5% a year and interest rates are 7.5% then you will lose. However, with tax deductions it justifies purchasing a home if you can afford. If you rent for 10 years you have nothing but an increase in expenses with no write off. At least if you own you get tax breaks and tax-free capital gains up to 500k.

Answer 4

You deduct in taxes and interest on your income taxes each year. For the first 7 years at least, with other deductibles, you'll likely to be living practically free.

Using a mortgage calculator the first year is $4195.29, excluding taxes and insurance.

If these costs are extraordinary you may need a smaller playpen.

Answer 5

If you pay CASH, it is much easier to profit on a house. That being said, you should buy your personal residence b/c it is the house you want & can afford to pay off in 15yrs or less, NOT b/c you're "investing".

Answer 6

Umm , look at houses in auctions first, you can find cheap houses , check http://stateauctions.deals-guide.com , could help you find great deals , thats how you can make serious profit