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this post was submitted on 09 Dec 2023
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Yes and no. Ownership is valuable. But the flexibility to live and move with less responsibility is also valuable.
It's not a matter of responsibility, you're responsible for making a payment each month, either way, so that cancels out.
Your paying the same kinds of money out of pocket each month in either case. You might as well own what your emptying your wallet for when you're done, than not. Wealth begets wealth, it snowballs.
In understand your point. It costs money to buy, sell, and broker house/mortgage. People have to live in their houses (in a normal economy) for like 3-5 years before even making a break even point on home. Just bought my first house and we're drowning in interest at the moment. Rents will fall faster when interes rates change than we will be able to refi. BUT it'll be better for us in the long run.
Its true that you need to save up the initial down payment. But in the long run it's smarter to do so, than renting.
It's definitely not a short-term investment, unless you really try to play the real estate market.
But I'm not speaking towards trying to turn a short-term profit, just not having a short/long-term loss.
Put it another way, whose mortgage would you want to pay off, yours, or someone else's?
Finally, real estate prices continue to always go up, so even if you had to sell short-term where you've been paying mostly interest you could probably sell the property for more value to make up the difference.
All home loans are mostly paying interest up front, it's not into the later years of the loan when you start paying substantial principle payments.
A neat trick is to always make an extra small principal only payment with each month mortgage payment, and that can change a 30 year loan to an 18 year loan.
Just make sure the write in the memo field on your check "principal only payment", or else the loan company will try to just take that extra money and put it on the interest only portion of the loan (they're tricky that way).
Historically rental costs have always gone up, and not down.
Did you mean the monthly mortgage payment amount on a home loan?
Ownership truly is better.
This is all neglecting that after that 18-30 years, you don't have that payment. Also, if you get a home that is much closer to your annual income, you can pay it off in a much shorter time. With the way properties are going right now that is almost a joke to say, but here I am, living on a dream. Also, having dealt with slumlord landleeches charging me $1k/month for a house that would have sold for $30k five years ago, I can honestly say that I never want to be subjected to a landlord again. Banks may be scummy, but they are heavily legislated scummy. Also, I would much rather be responsible for my house than some asshole. The house has mold, sparking outlets, the foundation is cracked in multiple locations, and huge cracks are forming in all of the walls as the house warps working towards collapse. And when I brought this all to the landlord's attention they tried to illegally evict me and raised my rent by $125/month. We immediately started viewing new places. My wife is pregnant, and if that baby has a single birth defect I am suing these two into oblivion.
~~I don't understand this sentence?~~
~~When you're done with the loan and it's paid off you don't have to make any more payments, so I'm not sure what you're trying to express?~~
Edit: I understand now. It was implied in what I was saying, so not being ignored. I was assuming people would know that when a mortgage is done being paid off you no longer have to continue to make payments.
Oh totally agree. I was suggesting 30 because most people seem to only have enough money to make a down payment on a 30-year loan. If you can get a 15-year loan that's much better.
I personally always got 15-year loans, because with those loans you end up paying the least amount of interest on. Thirty year loans are horrible, considering how much interest you have to pay versus principal, which is why I would suggesting you try to pay it off faster than the 30 years by paying a little bit extra every month with extra principal payments.
I was tacitly contrasting it with renting. After 30 years of renting, you still are going to be paying rent.
I was less commentating on the term of the loan and more on the total principal value. That said, for some insane reason, a 15-year mortgage also has a lower interest rate, so it is fundamentally the better option. But even with that, if you make $50k/year and are able to find a livable property for 75-80k, and get the 15-year, ostensibly there is little in one's way from paying it off in 7 to 10 years. Unfortunately livable houses for that price don't exist anymore for most of the US and making 50k is still a pipe dream. I don't even make that much and I have a Master's degree.
Not for everybody, but I’ve heard reasonable advice of getting the mortgage at a longer amortization period, then making extra payments. When I was looking it was typical to be allowed to increase the payment by 10-20% or to make additional payments up to 10-20% of the initial loan amount each year without penalty. That’s enough to potentially be paying it off in under 10 years without penalty(which is often in the range of 3 months simple interest, so still worthwhile if you unexpectedly come in to some money), but also gives you the flexibility of going back to the minimum payments if your financial situation changes.
Renting does make it cheaper/simpler to change accommodations though. Think things like starting a family and wanting to scale the household up from just two people to adding children and down again when those children move out. Renting makes it simpler to move closer to work, public transportation, schools, Etc. as a persons needs change. On the other hand, there’s also a lot of financial benefits to living in your own home: grants/rebates available for homeowners, not rental properties, being able to save costs by doing your own maintenance/renovations, etc..
Honestly, I have been renting for a year now and it has been horrendous. I don't think it's worth it honestly. I am paying about double what a mortgage would be and getting a house that the owners refuse to perform any maintenance on. I'm not about to do it as that is sweat equity that they are getting, not me. With the modern trend towards treating rentals as an investment instead if a business/responsibility, the mentality of landleeches is moving more and more towards cost minimization at any expense. It is an undeniable downward spiral that needs to be halted by force. Unfortunately tenants don't have the ability to do that and when 40%+ of single-family homes that hit the market are being purchased by equity firms and slumlords, driving the prices on the remaining homes well beyond their real value, it is a recipe for disaster.
At the current rate and trajectory, in the next 10 to 20 years, more than 90% of adults ages 25 to 50 will be renters. As the boomers die, some percentage of their homes will be passed to children, but some percentage of those will go on the market for some reason or another, which some percentage will then be snatched up as investment properties again. This is a logistic process, and while it would be functionally impossible to get it to 100%, numbers like 75% to 90% are infinitely more possible, and in fact, probably, without real governmental I intervention. (I actually have an Applied Mathematics degree, so this isn't me pulling things from my ass)
The other thing I didn’t think of is renting makes it a lot simpler to share accommodations. A group of 2-4 people can split the rent on a property that none of them would qualify for individually.
Agreed that the current situation parallels a lot of industries in that it’s concentrating wealth in the hands of those that are already ahead and it’s difficult for new people to become part of that system. Personally, I think the solution for any of these essential goods/services is crown corporations, which creates a standard of service that private industry has to compete with instead of being able to collude to maximize margins.
My solution was an adaptation of the NYC cab medallion system. Each city is allowed to provide medallions for up to a certain percentage of single-family residences to be rental properties and the medallion costs to maintain. It also comes along with rent caps based on the local cost of living and yearly property inspections by the city. One of the towns in my area actually did that last one because they actually care about being a good place to live, so they make some extra money on penalties or the overall property value for the town goes up because all of the rental properties are kept in very good condition. Win(city)-win(tenants)-accountability(landleeches).
Honestly, no city should want more than ~5% of single-family dwellings to be rentals. As you said, it is easier to get out of them. That means less reliable tax revenue, less people invested in the community, and potentially less community. I may be a math major, but I'm not an anthropology or sociology major, so that last one is definitely rectally sourced.
Also, I struggle, being in the exact situation where I need to get out from under an abusive landleech, to say that it is easy to move from rental to rental. Having to come up with 3k when we are already living and to mouth is really hard.
Oh, also, be careful suggesting cohabitation of multiple unrelated adults. Many cities have zoning ordinances prohibiting precisely that behavior. For instance:
Yes, you can have a couple of roommates, but if one of those roommates wants a partner to "move in" it becomes immediately illegal and actually grounds for eviction in some cases since you violated the zoning for the property.
Hmm…. I’ve never heard about those kinds of limits here. It’s not too uncommon for 3-5 people to split a house(which may or may not actually have 3-5 legal bedrooms) around here, though the trend seems to be splitting those houses into 2-3 legal suites, each of which might have multiple bedrooms.
I don’t think a medallion system is a solution though, as I understand that was brought in to artificially lower supply and increase revenue for the cab companies by limiting the number available. I do like the idea of more proactive enforcement of regulations to ensure that housing is kept in reasonable repair, but that can also increase prices since I’d venture most people put up with poor quality rentals due to them being the lowest cost; at least in terms of rent, though utility costs can outweigh that. If there was safe, clean, and affordable housing available then people trying to market sub-standard units wouldn’t get renters and would be forced to either upgrade the unit or sell.
The price hiking to cover the additional "costs of doing business" are specifically why I included a formula-based localized rent cap in the suggestion. The cost of doing business is for the business owners to figure out, not the customers. People have forgotten that. Hence the inflation. Hence the corporate plutocracy for an ad hoc governmental system. If you send someone to a convention, that doesn't go into your prices, that is a one-time cost that you incurred trying to expand your business. If you have to pay the city to withhold a single-family home from being accessible to ownership by a single family, that is the base market entry cost for being allowed to siphon money from someone who actually does things to get that money. That isn't something that gets passed on. I also want to add in that only individuals are allowed to own the medallions and they at least have to be residents of the county, if not the city itself. Money moves from the community to the community and builds the local economy instead of being sucked out I to some global holdings company never to be seen again. But that us my radical dream of a way to fix housing and work on the economy in a meaningful way.
It didn't take much to radicalize me though. Finding out that my landleechs directly obtained 25 rental properties in the city I'm in from landleeche who was retiring, getting a special mortgage that is not even available to us common folk that has basically 0 APR and effectively withholding 25 houses which my wife and I could have probably purchased at the time from going on sale, forcing us to rent instead of own like we wanted. Then treating us like we are the problem when I assert my rights. Yeah. Fuck landleeches, people's housing is not a meal ticket.
Could you elaborate? That seems the opposite of all the advice I've ever heard of or seen with my own eyes.
Normally it's better to get a fifteen year loan, than a thirty year loan and pay extra to try to pay it off in eighteen years.
In the past at least it seemed it was a lot harder for people to get fifteen year loans than thirty year loans, which is why I was offering the advice of trying to pay a 30-year loan off quickly, as the next best thing.
If I may ask, what industry are you working in, that you have a master's degree but earn so little?
This is a whole different discussion than the one we're having about home ownership vs renting, but I don't think anyone who's established by the time that they are in their 30s would be making 50k, they would be making a lot more, somewhere past the 100K mark for most professions, in the US at least, major cities.
In any case, I wouldn't suggest purchasing a home if you only had that much income available.
Apologies if this offends in any way, it is not meant to.
No, I'm offended by the lack of ability to get a better job, not being asked about it. I have a BS from Kent State University in Applied Mathematics and an MA from The Savannah College of Art and Design in Visual Effects. I took a job 7 years ago when I graduated with a remote company because it let me take care of an ill mother and father so they could get through to their retirement, but it has trapped me in a low-wage situation. The job started at pennies and hasn't really made it to dollars yet. I am actively applying, but everything in my industry requires credits by this point in my career and I have none, and I look underqualified for the AI sector jobs I am trying to get because I don't have any on-paper experience there either. So I am a very well-educated bonified genius with verified earth-shattering innovations and capacity-altering skills trapped in a dead-end job with a startup that has never been able to take off high enough to pay me even remotely what I provide to them. I say the innovations are earth-shattering and verified because I have discussed them with people who know what they are talking about, but are not in a position to hire me themselves, and they have confirmed. One friend actually was trying to find me some investment money through his professional and social networks to pursue one of them because it would hit so hard, but his network was not connected to the right people.
I truly wish you well, citizen, truly. I hope things work out for you.
Thank you. I'm trying to keep the chin up. It is getting heavy though.
I think you're neglecting to factor in the opportunity cost of investing that down payment over time. Granted most people don't have the necessary discipline so I agree a mortgage is a great way to force yourself to invest and probably best for most people.
But I'm not convinced it's going to make you wealthier in the long run vs putting all that money saved for a down payment in broad market ETFs and staying disciplined about it.
You're going to spend (usually a bit) more per month on mortgage payments than rent, so it's not really "the same kinds of money".
Is this true in the US? Its definitely not been true anywhere I've lived in Europe. A mortgage has always been cheaper for a larger property, it's just gathering the initial deposit to buy that's the hard bit.
In the USA, you no longer need a large deposit. Many lenders will go all low as 3% down. You pay extra fees each month when you are under 20% down though. Since most people can't afford the 20% down, they're stuck paying more each month.
Yes, generally in the USA you pay less to own than to rent if you put the 20% down. The other cost of ownership (maintenance and repairs). If you add those in, owning us still usually a bit cheaper. Renting, however, stabilizes the monthly cost.
Interesting, I didn't know about the low deposit requirements. I haven't really seen it below 10% over here, but it might well be possible.
It also depends if you're in cities or not I guess. My first house was in a small city and the rent wasn't bad there, it was just desirable to buy if possible. The next two cities I lived were capitals and rent is out of control there. Though house prices are too in those situations, so buying a place is usually cheaper but unattainable.
Not true from my experience. When I bought my house rents for similar houses were about $1.2k/mo and my mortgage is ~700/mo (which after taxes and insurance came out to ~$800/mo) but the other $400/mo can be easily eaten by maintenance costs depending on the year.
But what I haven't seen pointed out yet is that the mortgage will stay the same for 30 years, property taxes & insurnace won't grow much, but rents will continue to climb. It's been almost 3 years and houses similar to mine are now renting for $1500/mo or more but I now pay ~$900/mo for my house due a small tax increase last year that narrowly got passed (and was noted when it was proposed to be the first property tax increase in quite a few years)
That's true, I didn't really think about maintenence costs adding on. Ideally that stuff should add value back to the house so you don't "lose" it like rent, but that all depends on the housing market forever rising to infinity.
It always does. Always. As long as babies are being made, it always will.
Every decade or two there's a crash, but it doesn't go down that much when there is, and then when it recovers from the crash it goes right back up to what it was doing before.
What you commented is true in the US as well, unless you live in a very very poor neighborhood and rent.
It's not just money. Ownership means taking care of the house, and dealing with the buying/selling process. Would you advocate that university students buy a house for three years then sell again?
A good rental means you're paying the landlord to take care of things for you.
I agree in the long term, since we always need somewhere to live, that personal ownership is better; but if you're moving a lot, or perhaps depending on your job situation, I think renting is a valuable service for many people.
Assuming a university student had enough income, yes, most definitely. But most people buy houses after college, as they are busy paying for/off college first.
But realize that monthly rent payment is going to be about the same price as a monthly mortgage payment.
Well just realize that you're losing money by taking advantage of that service, and then, yes, it is valuable service, but also a more costly service.
Is it more convenient for you to have food already cooked delivered to you? Yes, of course. Will it cost you more money, will you lose more money, than if you went to the grocery store, got the ingredients, brought it home, and cook the food yourself? Most definitely.
The point I'm making is don't pay somebody else's mortgage off, pay your own mortgage off.
While strictly true, and I do not mean to be insulting, but that is a very financially dumb thing to say.
As I mentioned previously, you're giving your money to the landlord so that he can earn more money for himself, versus getting your own property and earning money for yourself.
Make your money work for you, and not for someone else. You earned that money.
I mean, that's exactly my point. Services exist to cook and deliver food. Sometimes they're desirable, sometimes they're even economically profitable for the customer.
Housing is different from food, and more important/worthwhile to own. But housing-as-a-service is still, I think, a valuable option to have.
In my experience, financially it's also a valuable option.
And yet, money is nothing in itself, unless you're a true capitalist. You're giving money to a landlord for him to provide you a service. You could instead invest that money in property and do the work of being your own landlord, and reap the benefits of that too.
I f'ing hate bots/people who waste my time with nonsense.
My apologies. Apart from the value of exchanging with other people for what they can provide, and the capitalist dream of having abstract money, money does indeed have intrinsic value.
You can wipe your bottom with it.
Especially the coins.
Afaik the mortgage market (setting mortgage payments, type of mortgage: fixed vs floating) is one of the more efficient markets. So choosing rent/own might not be such a big dilema.
Current state (continuous rise of home prices) is, however, concerning. It used to be that USA's flexibility to move (and refi) was its great advantage (in labor market).