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.

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Posted by gingerkittie

Member since Aug 2013

2675 posts

Posted on 6/16/15 at 3:06 pm to BiggerBear

quote:
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.

This 100%. We have no mortgage because we bought a small house for cash. We found a small house in great shape that had to be moved because the owners built a bigger home and the smaller home was in their way. It would cost them money to demolish it so they sold it very cheaply to whoever would move it. (It is NOT a trailer, it is a small woodframe cottage)

The cost of the move would be more than we paid for the house IF we hired a company to move it. However, my ever enterprising husband, (and brothers and friends) moved it on their own without breaking a single window or causing a single crack. What a sight to see.

Our secret to a mortgage free life - go for something small (that you can afford even if you are in financial bind). Don't go for the "big investment" or the McMansion to keep up with your friends.

Don't be enslaved by a high mortgage that will also possibly enslave you in a job you may hate to pay for it, or a situation where you have to work overtime to pay for it. This is especially important if you have a family of your own with small kids. A smaller, less fancy house where you can be with your kids and enjoy life is more important.

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