Reply to Americans locked into lower mortgage rates have been increasingly unwilling to sell their homes.

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[quote=Anonymous][quote=Anonymous]Yes higher mortgage rates hurt, but not as much as some articles (or posts) would have you believe.  You have to do the math for your own situation.

Household A: Locked in 2.5% on a $750K mortgage (monthly pmt $2963).  That means interest expenses in the first five year of mortgage are roughly $18K / year.  Adding the SALT deduction of $10K, they can deduct $28K come tax time (or just take the equivalent $27.7K standard deduction).

Household B: in current market, gets 7% rate on same $750K mortgage (monthly pmt $4989).  That mean deducible yearly interest expense of roughly $51.5K.  With SALT, that's $61.5K deductible, an increase of $33.5K in deductible expenses for tax savings of $13.4K (assuming 40% combined fed/state marginal tax rate), or $1117 per month.  That reduces the effective after tax monthly payment to $3872 when compared to household A's mortgage.  That's equivalent to a 4.66% mortgage rate (after tax).

So, relative to the 2.5% mortgage, still a big jump, but not as big as the hype would have you believe.

Per above poster claiming a $50K raise would be required: to handle that difference, you'd need an extra $3872 - $2963 = $909 per month, or $10908 annual after tax increase in income, which means a gross salary increase of roughly $18K before taxes are taken out (again assuming 40% combined marginal rate).  Any price increase component should be ignored: it has presumably also increased the equity in your existing home.  For someone making $300K, that's a roughly 6% raise, so it shouldn't be that big of a factor (assuming folks won't go through the trouble of a job change for small raises).

TLDR: do the math for your own situation, it may be a lot milder than the Sturm und Drang online would have you believe.[/quote]

Yet the mortgage affordability calculator tells me I can afford a house that would be smaller, uglier and in a worse neighborhood than where I currently live. That’s in addition to raises and promotions since I last bought. Granted, my area has doubled in price since 2019.[/quote]

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