Market Overview

Here's How Much A 30-Year Mortgage On A $250,000 Home Really Costs

Share:
Here's How Much A 30-Year Mortgage On A $250,000 Home Really Costs

Owning a home is part of the American dream for many young professionals, but understanding the long-term implications of obtaining and paying off a mortgage is a critical part of the process.

According to Zillow, the median price of a U.S. home is around $240,000. The average rate of a 30-year fixed-rate mortgage is currently 4.01%.

By using BankRate’s mortgage calculator and assuming a 4.01% rate on a 30-year, $250,000 mortgage, buyers can get a realistic look at just how much that home will end up costing.

Assuming zero down payment up front (most 30-year mortgages require at least 5%), that $250,000 mortgage will draw $180,193 in interest over the 30-year life of the mortgage. In other words, if you make only the minimum monthly payments on a 30-year mortgage, that $250,000 house will end up costing a total of $430,193.

See Also: Is Now The Time To Buy A House?

Finance Experts Weigh In

Kevin O’Leary recently said Americans should take mortgage payment seriously.

“If you want to find financial freedom, you need to retire all debt — and yes that includes your mortgage,” O’Leary said.

He said Americans should plan on having their entire mortgage paid off by age 45 because they will need the rest of their life to accumulate capital for retirement.

Personal finance expert Suze Orman has said Americans should make sure to be completely mortgage-free by the time they reach retirement.

“if you’re going to stay living it that house for the rest of your life, pay off that mortgage as soon as you possibly can,” Orman said.

Financial expert Dave Ramsey once said the only thing that should take precedence over paying off a mortgage is retirement investing.

“If you delay retirement investing until after you pay the mortgage, you’re losing valuable time that you won’t be able to make up—even with increased contributions to your retirement accounts,” Ramsey said.

See Also: 6 Common Pieces Of Career Advice That Are Completely Useless

Benzinga’s Take

Home buyers who focus strictly on sticker price and monthly payments and forget the bigger picture can end up paying much more for their house than they think they are paying. Before considering taking on a massive 30-year loan, make sure you understand you will likely ultimately be paying at least $100,000 more than the price of the house.

In addition, Ramsey’s advice of recommending retirement investing over paying off a mortgage assumes investors will get a higher rate of return than the interest rate of their mortgage. Investing in low-risk Treasury bonds or CDs in the current low-rate climate will not get investors anywhere near the 4% interest rate they are paying on their mortgage.

For more information on mortgage lenders check out the 6 Best Online Mortgage Lenders.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

Posted-In: Dave Ramsey Kevin O'Leary Suze OrmanEducation Personal Finance General Real Estate Best of Benzinga

 

Related Articles

View Comments and Join the Discussion!
Book A Demo
Learn How You Can Succeed In The Market With Benzinga Pro

Fastest Market News

Real-Time News Alerts

Customizable News Filters

Book A Demo

Ask Our Experts 11/17/19: Price Declines And Their Impacts On The Market

A Schwab ETF For Accessing International Equities At A Nominal Fee