Reply to Is there going to be panic selling?

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[quote=Anonymous][quote=Anonymous][quote=Anonymous]Can’t imagine having this man for a neighbor. [b]But on topic, I think people will cling to their 2-3% mortgages with everything they have.[/b] Some people who overextended in the past couple years with crazy rates and crazy prices might walk away but most people have tons of equity and low rates.[/quote]

Why do people keep saying this??

Cash now pays 4.2% and you have to pay taxes on that interest. The typical DC-area homeowner is at least in the 24% tax bracket.  Tack on 8% for Maryland and you’re now at 32%, which reduces your after-tax return on cash to 2.8%.

This means that a 3% mortgage is NOT a “cling on for dear life” asset.  Paying it off is probably the highest risk-free return out there for most people.[/quote]
If you pay off your mortgage right now, that's probably hundreds of thousands you don't have to live off of for other expenses. You still have to pay your property tax and insurance, eat, pay for utilities.

No one is going to lend an unemployed person a loan to pay for living expenses.  A 2 or 3% interest is probably not that much on an annual basis, depending on the size of your mortgage obviously.[/quote]

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