The Globe has a story out today about people facing higher home loan payments over the coming 18-months due to resetting adjustable-rate mortgage loans.

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“I don’t know how I’m going to survive,” said Sana Masoud, a single mother facing a $600 a month increase in one of two mortgages she obtained to buy a two-family house in Brighton for $712,000 in 2004.

That mortgage will reset on Dec. 1 to 7 percent, from 6.125 percent, pushing up Masoud’s total monthly housing costs to $4,350. She rents the second unit for $2,400 and earns $63,000 a year as a computer programmer. But her income will not be enough to cover the mortgage and other expenses, such as property taxes, college tuition for her eldest daughter, and ongoing medical bills for her youngest daughter.

Well, there’s a little bit more to this story.

This owner had leveraged her investment property to the hilt, from the very beginning.

Let’s do the math. Ms Masoud purchased her two-family property in 2004 for $712,000. Her first mortgage loan was for $569,600 (information courtesy of the Suffolk Deeds Registry of Deeds).

I see that the owner took out a second loan at the same time; in 2004, she borrowed $100,000, and in 2006 she paid it back and took out another loan, taking out $103,200; it’s unclear what the monthly payments are on this loan.

Payments on her first loan, based on the stated rate of 6.125%, were approximately $3,462 per month.

Meanwhile, her annual property taxes are around $7,200, or $600 per month (information courtesy of the City of Boston Assessor).

Plus, she probably pays another $600 a month toward the second loan.

Hmmm. Based on my calculations, Ms. Masoud is already responsible for payments of $4,800 per month. The Globe says she isn’t; I’m not sure the discrepancy, but it could be that the difference is due to my including property tax payments.

Making things a little bit better, the owner has been collecting $2,400 in rent, each month.

So, based on my calculations at least, Ms Masoud is paying $2,262 per month in housing costs – $3,462 is first loan, $600 is second loan, property taxes of $600, minus $2,400 in rent.)

Her monthly gross income is $5,250, her net is probably around $3,800. Her currently housing expense is approximately 43% of her gross income ($2,262 / $5,250) and 57% of her take-home income.

Starting in December when her first loan resets to 7.0%, her new first loan payment will be $3,790, a difference of $328.

Meaning her monthly housing expense will then be $2,590 – $3,790 for the first loan, $600 for the second loan, $600 in property taxes, minus $2,400 in rent.

This is 49% of her gross income and 68% of her net income.

Well, now I understand her concerns. If I was facing that situation, I’d freak out.

My opinion? Her problem is exacerbated by the higher interest rate, but not caused by it. She already had a problem.

Ms Masoud, you need to sell your property. Now.

Thousands brace for mortgage rate jump – By Kimberly Blanton, The Boston Globe

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Updated:  1st Q 2018

Author Profile

John Ford
John Ford
EXPERIENCE

Over the course of 20 years in the Boston downtown real estate market, John represented and sold numerous, condominiums, investment and development properties in Greater Boston and in the surrounding suburbs



In addition to representing Boston condo buyers and sellers, John is currently one of the most recognized Boston condo blog writers regarding Boston condominiums and residential real estate markets. John's insights and observations about the Boston condo market have been seen in a wide variety of the most established local & national media outlets including; Banker and Tradesman, Boston Magazine The Boston Globe, The Boston Herald and NewsWeek and Fortune magazine, among others.



HISTORY

For over 24 years, John Ford, of Ford Realty Inc., has been actively involved in the real estate industry. He started his career in commercial real estate with a national firm Spaulding & Slye and quickly realized that he had a passion for residential properties. In 1999, John entered the residential real estate market, and in 2000 John Started his own firm Ford Realty Inc. As a broker, his clients have come to love his fun, vivacious, and friendly attitude. He prides himself on bringing honesty and integrity to the entire home buying and selling process. In addition to helping buyers and sellers, he also works with rental clients. Whether you’re looking to purchase a new Boston condo or rent an apartment, you’ll quickly learn why John has a 97% closing rate.

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Contact
John Ford and his staff can be reached at 617-595-3712 or 617-720-5454. Please feel free to stop by John's Boston Beacon Hill office located at 137 Charles Street.




John Ford
Ford Realty Inc
137 Charles Street
Boston, Ma 02114

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