4 ms·

> You hold a 5 percent fixed-rate 30-year mortgage. Is that really so? I've read that the mortgage interest rates are around 2-3% in Europe (by the way, in Rus

> You hold a 5 percent fixed-rate 30-year mortgage. Is that really so? I've read that the mortgage interest rates are around 2-3% in Europe (by the way, in Russia they start from 9%-11% and can be as high as 15%). > A house in 1897 cost the same as a house in 1997, adjusted for inflation. It is hard to believe, given new technologies that are supposed to make it cheaper. Also what the author didn't take into account - she assumes that she will be able to work forever. But what if you get too old and won't be able to do your job well? What if you get sick? What if you get fired? What if there is a financial crisis? What if the company you work at shuts down? In all of these cases, a renter will be kicked out on the street (I know in some countries like Finland the government provides free apartment for people who don't have money, but I assume in US you'll have to live in the street). But if you own a house then you can live there even if your income drops. You can live without renovations, you can consume less electricity, you can ask for a tax deduction, you can rent out a room. Also, an owner can leave a house or an apartment to his children. The author writes about opportunity cost, that you can invest your money. But it is very high risk. If you invest into a private fund, it can become a bankrupt any time, if you invest into something government-related, tough luck if the national currency crashes. Investing into a house looks like a more safe option. Of course, there are downsides to the mortgage. If you buy a house or an apartment, it will be probably not in the best location, far away from the center of the city in an undeveloped area, no good transportation around. Because the good ones are too expensive.

vcanales 9y ago
> But if you own a house then you can live there even if your income drops. This is assuming you payed off the mortgage, no? Otherwise, at least by the 10 year example given on the article, you’re busted since you can’t make mortgage payments...
- codedokode 9y ago
  Yes, under that assumption. But even if nothing bad happens, you will retire sooner or later and your income will drop.
- mantas 9y ago
  In some countries "mortgage vacation" is mandated by law. You can just stop paying it for 6-12 months if shit hits the fan. Some banks allow re-financinng to prolong mortgage and lower monthly payments too. There're insurances that cover your mortgage if you loose your incomes for legitimate reason (injury, company downsizing etc). Neither of those exist when renting..
phamilton 9y ago
> I've read that the mortgage interest rates are around 2-3% in Europe From what I understand, these aren't fixed rate 30-year. The rate can change year to year. The US is unique in offering one interest rate that will be consistent for 30 years.
- jpatte 9y ago
  FYI my wife and I signed for a mortgage 4 months ago here in France for our new home. 325k€, 25-year, 1.66% interest rate, 0.8% insurance rate for complete coverage of the both of us. Both fixed rates. The rates were actually going up at that time - if we could have borrowed 6 months earlier we would likely have had even better rates. Also if you can borrow for a shorter period of time the rates get much lower.
- clappski 9y ago
  You can get variable and fixed rate mortgages in the UK, fixed typically have higher interest rates but obviously variable can outpace it depending on markets.
  - refurb 9y ago
    Fixed rate for how long? I know in Canada the longest mortgage term you can get is 10-years and you pay a substantial premium over 5 years. Mortgages are still amortized over 30. What that means is if interest rates go from 2% to 6% over a 5 year period, you have to renew your mortgage at the much higher rate. In the US, if you never move, your mortgage payment might never change for 30 years.
jacobr1 9y ago
>> A house in 1897 cost the same as a house in 1997, adjusted for inflation. >It is hard to believe, given new technologies that are supposed to make it cheaper. I'm not sure if this is really true but it wouldn't surprise me. A "house" actually has more stuff these days. Structurally engineered lumber that will last longer. Inspections to ensure it will survive the disasters in $localArea. Larger square footage. Granite counter tops. Fancy HVAC systems that are increasingly more complex and higher efficiency. I bet on a per-square-foot basis house. Not to mention most the price of house purchase is the land-value, which is probably even higher than historical norms in desirable areas.

vcanales 9y ago

> But if you own a house then you can live there even if your income drops. This is assuming you payed off the mortgage, no? Otherwise, at least by the 10 year example given on the article, you’re busted since you can’t make mortgage payments...

codedokode 9y ago
Yes, under that assumption. But even if nothing bad happens, you will retire sooner or later and your income will drop.
mantas 9y ago
In some countries "mortgage vacation" is mandated by law. You can just stop paying it for 6-12 months if shit hits the fan. Some banks allow re-financinng to prolong mortgage and lower monthly payments too. There're insurances that cover your mortgage if you loose your incomes for legitimate reason (injury, company downsizing etc). Neither of those exist when renting..

phamilton 9y ago

> I've read that the mortgage interest rates are around 2-3% in Europe From what I understand, these aren't fixed rate 30-year. The rate can change year to year. The US is unique in offering one interest rate that will be consistent for 30 years.

jpatte 9y ago
FYI my wife and I signed for a mortgage 4 months ago here in France for our new home. 325k€, 25-year, 1.66% interest rate, 0.8% insurance rate for complete coverage of the both of us. Both fixed rates. The rates were actually going up at that time - if we could have borrowed 6 months earlier we would likely have had even better rates. Also if you can borrow for a shorter period of time the rates get much lower.
clappski 9y ago
You can get variable and fixed rate mortgages in the UK, fixed typically have higher interest rates but obviously variable can outpace it depending on markets.
- refurb 9y ago
  Fixed rate for how long? I know in Canada the longest mortgage term you can get is 10-years and you pay a substantial premium over 5 years. Mortgages are still amortized over 30. What that means is if interest rates go from 2% to 6% over a 5 year period, you have to renew your mortgage at the much higher rate. In the US, if you never move, your mortgage payment might never change for 30 years.

jacobr1 9y ago

>> A house in 1897 cost the same as a house in 1997, adjusted for inflation. >It is hard to believe, given new technologies that are supposed to make it cheaper. I'm not sure if this is really true but it wouldn't surprise me. A "house" actually has more stuff these days. Structurally engineered lumber that will last longer. Inspections to ensure it will survive the disasters in $localArea. Larger square footage. Granite counter tops. Fancy HVAC systems that are increasingly more complex and higher efficiency. I bet on a per-square-foot basis house. Not to mention most the price of house purchase is the land-value, which is probably even higher than historical norms in desirable areas.