4 ms·

I'm not seeing the parallel there. Having a mortgage is pretty much the most efficient way to save money for the future. But I've no idea why that's related to

by axod 17y ago

I'm not seeing the parallel there. Having a mortgage is pretty much the most efficient way to save money for the future. But I've no idea why that's related to having kids. And what's fucked up about having kids young in life? It makes a ton of sense when you think about it.

gdee 17y ago
You forgot an (IMHO|IMNSHO) or two in there I think.
Retric 17y ago
The problem with a mortgage is it tends to increase consumption. Most people are fine renting a fairly small apartment relative to their needs, but as soon as they are buying a place they start thinking about having an extra rooms just in case etc.
- axod 17y ago
  I don't think that's the case. Mortgage is just borrowing against your future worth. If some people over estimate that then it's their own problem. The problem is usually silly people borrowing far more than they can afford, and lenders trying to push people into borrowing more than they can afford. But that's not a problem with mortgages per se. Renting is ok if you like throwing money away, or need to move often.
  - Retric 17y ago
    It's not just a question of needing to move often as much as benefiting from being able to move often. I walk to work and save a lot of time and money by doing so. But, I was willing to take a job with an hour+ commute because I knew I could quickly move there. PS: The cost of renting tends to balance with the costs of buying a home (including transaction and maintenance costs etc) such that it's rare for one to win out over the other in a healthy housing market. I do spend a lot of money living in this area, but I also invest a lot more money than I could if I was trying to buy in the area even with a long commute. Even with the huge drop in housing costs buying in this area is extremely expensive in large part due to the number of people renting their houses / condo's.
  - theBobMcCormick 17y ago
    I don't understand the throwing money away idea about renting. Are you anticipation appreciation (good luck for the foreseeable future)? Is it the home mortgage deduction you're so excited about? For most people, unless they're sure they're gonna be in their home for a long time (10+ years maybe?) I'm not sure how purchasing is worse than renting.
    - axod 17y ago
      In the UK house prices have risen well. And personally I like staying the same place for at least 5 years.
      - theBobMcCormick 17y ago
        I think a desire/plan to stay in one place for an extended period of time is a good reason to purchase a home. The best reason really. But I think if you're pretty uncertain about whether you'll want to spend 10+ years in 1 house it makes more sense to rent. And I really don't understand so many people have bought into this meme that renting is "throwing money away". The facts just don't seem to support that conclusion.
notauser 17y ago
In the UK average rental yields are under 5%, which means that on average over time renting is cheaper than servicing mortgage debt. There are a lot of other factors that make a difference though, especially related to personal financial discipline, over-buying and tax incentives. Any of those can push things one way or the other.
- axod 17y ago
  >> "In the UK average rental yields are under 5%, which means that on average over time renting is cheaper than servicing mortgage debt." If you're paying over 5% for a mortgage you're doing something seriously wrong. Hell - if you're paying more than 2% you've been had. And the other tiny point is that at the end of your mortgage, you own the house and can cash it in. If you have the option to buy, buying is always the sane choice.
  - notauser 17y ago
    Interest rates are unusually low at the moment, they more often hover between 4-6% and have been as high as 8% (and this is the base rate - most people pay more than this, especially for fixed rate deals). In the long run owning your house may or may not work out to be more profitable than keeping the difference between rent and mortgage payments (plus maintenance plus taxes plus other fees) but it's not always the case. This is especially true if the gap between the mortgage payment (plus costs and fees) and rent is well invested. At the moment countering the low cost of borrowing is the fact that equities are also very cheap. Every pound invested in the FTSE 250 in mid 2009 was a great buy, more than compensating for the low mortgage rate. In the end buying vs renting is mostly a personal decision rather than an economic one. EDIT: Graph of the UK base rate back to '97 - most people pay 2-4% above the interbank rate listed here. http://www.housepricecrash.co.uk/graphs-base-rate-uk.php http://www.housepricecrash.co.uk/graphs-base-rate-uk.php
    - axod 17y ago
      >> "This is especially true if the gap between the mortgage payment (plus costs and fees) and rent is well invested." Firstly, there often isn't a gap, or it's negative - mortgage payments are less than rental payments. Secondly, you'd be hard pressed to find a better paying investment than property. House prices always increase in the long term. It's an investment. You buy a property, then a few years later can sell it for quite a bit more than you paid. As long as it's a property that is attractive people will always want it. Personally I find the economics extremely clear cut. Mortgage payments here are comparable to rental payments, if not lower. So you can either give the money to a landlord and get nothing in return, or you can give it to a bank, pay off the balance (Long terms savings), and benefit when house prices increase if you sell it. Or of course just wait until mortgage is over and then live there rent free for the rest of your life. I've never understood why the economics are even debated online like this :/

by axod 17y ago

gdee 17y ago

You forgot an (IMHO|IMNSHO) or two in there I think.

Retric 17y ago

The problem with a mortgage is it tends to increase consumption. Most people are fine renting a fairly small apartment relative to their needs, but as soon as they are buying a place they start thinking about having an extra rooms just in case etc.

axod 17y ago
I don't think that's the case. Mortgage is just borrowing against your future worth. If some people over estimate that then it's their own problem. The problem is usually silly people borrowing far more than they can afford, and lenders trying to push people into borrowing more than they can afford. But that's not a problem with mortgages per se. Renting is ok if you like throwing money away, or need to move often.
- Retric 17y ago
  It's not just a question of needing to move often as much as benefiting from being able to move often. I walk to work and save a lot of time and money by doing so. But, I was willing to take a job with an hour+ commute because I knew I could quickly move there. PS: The cost of renting tends to balance with the costs of buying a home (including transaction and maintenance costs etc) such that it's rare for one to win out over the other in a healthy housing market. I do spend a lot of money living in this area, but I also invest a lot more money than I could if I was trying to buy in the area even with a long commute. Even with the huge drop in housing costs buying in this area is extremely expensive in large part due to the number of people renting their houses / condo's.
- theBobMcCormick 17y ago
  I don't understand the throwing money away idea about renting. Are you anticipation appreciation (good luck for the foreseeable future)? Is it the home mortgage deduction you're so excited about? For most people, unless they're sure they're gonna be in their home for a long time (10+ years maybe?) I'm not sure how purchasing is worse than renting.
  - axod 17y ago
    In the UK house prices have risen well. And personally I like staying the same place for at least 5 years.
    - theBobMcCormick 17y ago
      I think a desire/plan to stay in one place for an extended period of time is a good reason to purchase a home. The best reason really. But I think if you're pretty uncertain about whether you'll want to spend 10+ years in 1 house it makes more sense to rent. And I really don't understand so many people have bought into this meme that renting is "throwing money away". The facts just don't seem to support that conclusion.

notauser 17y ago

In the UK average rental yields are under 5%, which means that on average over time renting is cheaper than servicing mortgage debt. There are a lot of other factors that make a difference though, especially related to personal financial discipline, over-buying and tax incentives. Any of those can push things one way or the other.

axod 17y ago
>> "In the UK average rental yields are under 5%, which means that on average over time renting is cheaper than servicing mortgage debt." If you're paying over 5% for a mortgage you're doing something seriously wrong. Hell - if you're paying more than 2% you've been had. And the other tiny point is that at the end of your mortgage, you own the house and can cash it in. If you have the option to buy, buying is always the sane choice.
- notauser 17y ago
  Interest rates are unusually low at the moment, they more often hover between 4-6% and have been as high as 8% (and this is the base rate - most people pay more than this, especially for fixed rate deals). In the long run owning your house may or may not work out to be more profitable than keeping the difference between rent and mortgage payments (plus maintenance plus taxes plus other fees) but it's not always the case. This is especially true if the gap between the mortgage payment (plus costs and fees) and rent is well invested. At the moment countering the low cost of borrowing is the fact that equities are also very cheap. Every pound invested in the FTSE 250 in mid 2009 was a great buy, more than compensating for the low mortgage rate. In the end buying vs renting is mostly a personal decision rather than an economic one. EDIT: Graph of the UK base rate back to '97 - most people pay 2-4% above the interbank rate listed here. http://www.housepricecrash.co.uk/graphs-base-rate-uk.php http://www.housepricecrash.co.uk/graphs-base-rate-uk.php
  - axod 17y ago
    >> "This is especially true if the gap between the mortgage payment (plus costs and fees) and rent is well invested." Firstly, there often isn't a gap, or it's negative - mortgage payments are less than rental payments. Secondly, you'd be hard pressed to find a better paying investment than property. House prices always increase in the long term. It's an investment. You buy a property, then a few years later can sell it for quite a bit more than you paid. As long as it's a property that is attractive people will always want it. Personally I find the economics extremely clear cut. Mortgage payments here are comparable to rental payments, if not lower. So you can either give the money to a landlord and get nothing in return, or you can give it to a bank, pay off the balance (Long terms savings), and benefit when house prices increase if you sell it. Or of course just wait until mortgage is over and then live there rent free for the rest of your life. I've never understood why the economics are even debated online like this :/