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re: Percentage of net worth "invested" as equity in your primary residence?
Posted on 1/15/14 at 11:07 am to Ace Midnight
Posted on 1/15/14 at 11:07 am to Ace Midnight
quote:
if you're going to overspend on anything, it should be the home
I couldn't disagree more.
quote:
Going with 15-year mortgages builds in a conservative bias against overspending - which is why I recommend those for most people.
I disagree again. EVERYONE should get a 30 year mortgage and then treat it how they want to treat it as far as mortgage payments go. Who knows what will happen in 5 years and this guy will be stuck with a much higher payment that he is forced to make.
I understand some people have an emotional connection to where they are living and that is what led to my "financially immature" comment. A house is a liability, not an asset.
More food for thought OP - You live in Huntsville, Alabama which is basically subsidized by the government in terms of what is growing the local economy. If the national government cuts defense spending, your $500,000 house just went to $250,000.
2
Posted on 1/15/14 at 11:25 am to I Love Bama
quote:
A house is a liability, not an asset.
While I understand this mindset - a house does appreciate (under normal circumstances) and usually holds its own against inflation - sometimes outperforming it. As you pointed out, there are risks associated with housing market downturns, etc.
However, to assess a home as a liability is extremely shortsighted - you cannot "make a living" from your house, - that's true. However, let's take an example:
Let's say housing costs - for rentals average about $650 per month for an area, and includes only the basic, sewer, water and garbage.
Buy a $150,000 house - once it is paid for, that is akin to an investment producing $450+ per month (because as the homeowner, I am deducting ~$200 for taxes and regular maintenance), it increases in value over time and you can get your money back out of it.
If that's not an asset, it will do until an asset comes along - I agree that a financed home - particularly one with very little equity, is a liability and most people under 35 would be better - financially - in a rental situation.
This post was edited on 1/15/14 at 11:28 am
Posted on 1/15/14 at 2:02 pm to I Love Bama
quote:
I understand some people have an emotional connection to where they are living and that is what led to my "financially immature" comment. A house is a liability, not an asset.
A house can also have economic value far exceeding financial value and you are being a little dismissive with the "emotional connection" piece. I would rather splurge a little on a house that I love than I would on something with 4 wheels that gets me from point a to point b for example.
IMO,there should always be a balance between enjoying it now and saving for later. I used to take it to the extreme with saving and frugality, but I've found greater balance and enjoyment over the last few years in spending a little money.
(I don't post much, but lurk often and enjoy your posts, by the way)
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