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re: What's your opinion of people who are underwater on their mortgages?
Posted on 6/16/15 at 12:05 pm to gorillacoco
Posted on 6/16/15 at 12:05 pm to gorillacoco
You pay so much in mortgage interest (and mortgage insurance, depending) over the years that "building equity" is incredibly misleading. Not to mention property taxes, homeowners insurance, maintenance, etc.
Buying a home is not an "investment", it's simply you buying a home vs. renting it.
Buying a home is not an "investment", it's simply you buying a home vs. renting it.
5
Posted on 6/16/15 at 12:07 pm to kilo1234
quote:
You pay so much in mortgage interest (and mortgage insurance, depending) over the years that "building equity" is incredibly misleading. Not to mention property taxes, homeowners insurance, maintenance, etc.
I agree with this statement. Most people (especially at the beginning of a mortgage) pay far more in interest, additional utilities, property tax, insurance, and maintenance than they ever would living in an apartment.
Posted on 6/16/15 at 12:31 pm to kilo1234
quote:
You pay so much in mortgage interest (and mortgage insurance, depending) over the years that "building equity" is incredibly misleading. Not to mention property taxes, homeowners insurance, maintenance, etc.
Buying a home is not an "investment", it's simply you buying a home vs. renting it.
You analysis is one-sided. Unless you compare it to renting, you can draw no conclusion from the expenses of ownership as investment. When you rent, 100% of your payment is expense. When you own, only the interest portion of your payment is expense, and it is tax deductible. The remainder pays down principal and becomes equity. If the home increases in value, you get a return, in capital gain, on the investment in the property. If the home loses value, you can lose some money, but still its probably not the 100% loss that renting is by comparison.
A bigger problem, in my mind, and one that helped lead to the bubble, is people purchasing properties that they really could not afford. This is pervasive. If people would settle for a smaller home and pay it off more quickly, the wisdom of the investment would be much more apparent.
Posted on 6/16/15 at 1:02 pm to kilo1234
quote:
You pay so much in mortgage interest (and mortgage insurance, depending) over the years that "building equity" is incredibly misleading. Not to mention property taxes, homeowners insurance, maintenance, etc.
Buying a home is not an "investment", it's simply you buying a home vs. renting it.
You can't really say this without comparing apples to apples. Sure, you could spend a decent amount of money on taxes/insurance that you wouldn't by renting, but you're ignoring that renting means you're paying profit to your landlord. I pay less per month for my total mortgage payment than I could pay to rent a similar house in my neighborhood. So the only extras I'm really on the hook for is upkeep, and I'm OK with that.
To add to that, a professional athlete rented next door to my parents. The house he was in could be bought in the $375k to $400k range. His rent was $3200 a month. You could buy it and pay much less per month after factoring in insurance and taxes. And that doesn't take into account any equity (even the small bit you start building form day 1). The only thing that really hurts you is closing costs outside of the down payment, but sellers cover a chunk of that these days (most times).
Posted on 6/16/15 at 1:38 pm to kilo1234
quote:
You pay so much in mortgage interest . Not to mention property taxes, homeowners insurance, maintenance, etc.
You pay all of this when you rent as well. It's not like your landlord is doing it to give you a break and he just eats these costs. He prices his rent to cover everything you just mentioned. Except most of it is higher because it's not considered his primary residence. Add to that the profit he is looking to make and you are in the hole more for rent than buying every time.
Now, I'm not saying renting is always the wrong option. Depending on your requirement to move quickly, high quantity of other debt, or other circumstances like that, then it may be smarter to rent. But from a purely financial standpoint, you cannot say that renting is cheaper because you don't have to pay for x,y,&z as a tenant.
Posted on 6/16/15 at 2:20 pm to kilo1234
quote:
You pay so much in mortgage interest (and mortgage insurance, depending) over the years that "building equity" is incredibly misleading. Not to mention property taxes, homeowners insurance, maintenance, etc.
Buying a home is not an "investment", it's simply you buying a home vs. renting it.
wrong. all wrong.
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