3 ms·
A good way of looking at the “hidden cost” of buying your home- when you get a mortgage to buy a house, you’ve simply shifted from renting your home to renting
by maxander 8y ago
A good way of looking at the “hidden cost” of buying your home- when you get a mortgage to buy a house, you’ve simply shifted from renting your home to renting the money used to buy your home.
Since your house and that cash are (sorta definitionally) worth the same amount, which you do makes less of a difference than you would think. (And no, it doesn’t matter that the mortgage money is “rent to own”- as the article points out, a home-renter could have just as easily been putting that extra cost into stocks the whole time.)
- crispyporkbites 8y agoThis is the best way to think about it. You're renting the money and choosing to invest it in a house. Of course no one would ever give you half a million in cash with a 50k deposit, so even if there was a better place to investment the money (e.g. stocks) you couldn't put it there anyway. A mortgage is probably the only way a common person can get this kind of leverage and invest in any asset class. It's really unlikely you have access to some other capital at a cheaper rate (even though a mortgage at 90% loan to value can be expensive, it's almost always the cheapest form of a "normal" person will get), so it usually makes sense to get one.