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Comment by milesvp | Hacker News Reader

The interest rates were wild in 1982. My dad said that no one would lend for a mortgage, and we ended up doing seller financing to buy my childhood home.

Also, not enough people talk about housing prices in high interest rate environments. Mortgage payments are the thing that tether housing prices, and act as a lever. We see it today with just an extra 4% with low housing volume and people reluctant to sell, because then they’d need a new mortgage at the new rate. People who would like to downsize don’t since their mortgage payments often ends up similar.

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I remember my parents being excited about the opportunity to refinance their mortgage to something in the high teens. And now these days headlines act like the apocalypse is occurring when mortgage rates are in the 6-7 range.

Back during those high interest rate days, housing costs vs income were much better

Rates are lower, but housing cost is much, MUCH higher as a percentage of total income.

I'd rather owe 100k over 30 years at 15% than 300k at 4%.

Now is 300K at 7%...

You also need to adjust the 100k for inflation. It'd be well over 300k now. I'd rather the 300k at 4% in that scenario.

You do you, but at the end of the 30 years the latter person is ahead by quite a bit.

They really aren't. To pay off a 30yr 300k at 4% you pay $17350 a year. If you pay $17350 on a 100k 16% mortgage you pay it off in under 18 years and have saving of 222k (even at 0% returns) + 100k house by the time 30yrs is up.

The argument would be that after 30 years of 2.3%/yr inflation, the 300k house would be worth 600k in future dollars, and the 100k house would be worth 200k.

However as 15% interest rates implies an inflation rate far higher than 2.3% that argument breaks. With 7% inflation on a 100k house it's worth 760k after 30 years, more than the 600k in the 300k range.

Of course what that means in terms of big macs you can buy is different.

Not only that but if your salary keeps up with inflation, and you overpay the mortgage, you'll have cleared the 100k/7% inflation mortgage in 10 years but it will take 18 years to clear the 300k mortgage.

Sure, having your wage not decrease in real terms is a different challenge, but if that does happen then you're far better off with the 15% interest rate situation.

House prices have gone up a lot. Like a lot of a lot.

I remember a friend having a 17% mortgage, which he eventually walked away from.

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