4 ms·

Saddling someone with (or allowing him to take on) an unpayable debt raises him to a state more equal with people who were previously better off? How? Doesn't

Saddling someone with (or allowing him to take on) an unpayable debt raises him to a state more equal with people who were previously better off? How? Doesn't buying a house (at market price) have an approximately zero effect on your net worth?

piker 8y ago
> How? Doesn't buying a house (at market price) have an approximately zero effect on your net worth? As of the closing date, sure. However, closing on a home allows a renter to become an owner for about the same monthly cost (plus produces some significant tax benefits typically only available to the wealthy). After 30 years of paying a mortgage, if holding all else constant, one probably owns the property. After 30 years of paying rent, holding all else constant, one still owns nothing.
- pixelbash 8y ago
  This is okay as long as you are in one of the locations where mortgage is roughly equal to rent. In some places it’s closer to double, unless you want a 100 year mortgage.
  - brightball 8y ago
    If you live in a place where a mortgage is double rent, you're basically a temporary resident.
    - pixelbash 8y ago
      Our rent: 700NZD pw Our calculated repayment on a 20 year mortgage with a 300k down payment on the estimated CV of this house: $1370 NZD pw Yep!
  - seanmcdirmid 8y ago
    Also, interest-only loans are a thing in some parts of the world. Beijing is a good example of a place where rents are way lower than sale prices, so you can totally wind up paying $1000/month to rent something that is on the market for $1 million.
    - pmwhite 8y ago
      That only makes sense for absurdly aggressive speculators or people with the political connections to borrow money for 1% or less. I have a fixed 15 year loan at 2.75%, which seems like a pretty good deal to me. Know where I can borrow a few hundred thou at 1%?
      - seanmcdirmid 8y ago
        The interest rate isn’t only important, so is the principal. Yes, sometimes buying makes sense, but sometimes renting makes sense as well.
  - gambiting 8y ago
    In UK mortgage usually works out a lot lot cheaper than renting. I could cut my rent by about 25% by buying a place, the only issue is I need a deposit in the first place.
    - bootcode 8y ago
      I didn't do the math, but know people who did and got that the initial deposit is a real game changer. Assuming we pay the same for mortgage and rent, who wouldn't want to pay rather mortgage? But remember, to pay the same, there was a huge downpayment. If you were to invest that rationally, long term returns could be worth it, even while paying rent. OTOH, rational investing (in a balanced fund portfolio) is hard, and mortgage forces you to save. YMMV, do your math.
      - gambiting 8y ago
        There's lots of other factors to take into account though. I guess I was really unlucky, and had to move relatively frequently in the last 8 years(on average once a year) - the cost of moving is easily £1500-2000, just in agency fees and moving fees and everything else. That makes renting even more expensive. And then I definitely want to own my house before brexit, as an immigrant I will not risk not being able to rent if things go tits up.
    - deleted 8y ago
      [deleted]
- AlexandrB 8y ago
  > After 30 years of paying rent, holding all else constant, one still owns nothing. Nothing except all the money saved on property taxes, maintenance and repairs, home insurance, etc. And, as another poster noted, this assumes mortgage payments similar to rental prices. The math on home ownership is not a slam dunk in favor of owning in every region and should be considered carefully.
  - s73v3r_ 8y ago
    Yeah, but a mortgage payment stays constant through those 30 years, assuming you didn't get an adjustable rate. Rents rise every year.
    - deleted 8y ago
      [deleted]
  - AnimalMuppet 8y ago
    If your rent doesn't cover the property taxes, maintenance and repairs, and home insurance, the owner is going broke.
    - mswiss 8y ago
      yes, but that doesn't mean that someone could buy a house right now and provide the same deal as the existing owner. The existing owner could have bought while interest rates were higher and prices were lower and refinanced down to a much lower monthly payment.
nikanj 8y ago
As long as zoning and housing markets remain as dysfunctional as they are, you get to enjoy the benefits of housing going up 20+% per year. Leverage to the hilt, get a million-dollar home, keep it for three years, pocket a cool 500k. Obviously this time it's different, and housing shall continue it's spectacular bull run forever.
- mac01021 8y ago
  This is only happening in a handful of cities, though, right?
  - nikanj 8y ago
    Pretty much all cities above a certain size, at least in the "west". Not sure how it's on other parts of the planet. Populations are migrating to cities en masse, which creates huge demand for city housing. And most cities haven't really been keeping up with the supply side since the 1930s or so.

piker 8y ago

> How? Doesn't buying a house (at market price) have an approximately zero effect on your net worth? As of the closing date, sure. However, closing on a home allows a renter to become an owner for about the same monthly cost (plus produces some significant tax benefits typically only available to the wealthy). After 30 years of paying a mortgage, if holding all else constant, one probably owns the property. After 30 years of paying rent, holding all else constant, one still owns nothing.

pixelbash 8y ago
This is okay as long as you are in one of the locations where mortgage is roughly equal to rent. In some places it’s closer to double, unless you want a 100 year mortgage.
- brightball 8y ago
  If you live in a place where a mortgage is double rent, you're basically a temporary resident.
  - pixelbash 8y ago
    Our rent: 700NZD pw Our calculated repayment on a 20 year mortgage with a 300k down payment on the estimated CV of this house: $1370 NZD pw Yep!
- seanmcdirmid 8y ago
  Also, interest-only loans are a thing in some parts of the world. Beijing is a good example of a place where rents are way lower than sale prices, so you can totally wind up paying $1000/month to rent something that is on the market for $1 million.
  - pmwhite 8y ago
    That only makes sense for absurdly aggressive speculators or people with the political connections to borrow money for 1% or less. I have a fixed 15 year loan at 2.75%, which seems like a pretty good deal to me. Know where I can borrow a few hundred thou at 1%?
    - seanmcdirmid 8y ago
      The interest rate isn’t only important, so is the principal. Yes, sometimes buying makes sense, but sometimes renting makes sense as well.
- gambiting 8y ago
  In UK mortgage usually works out a lot lot cheaper than renting. I could cut my rent by about 25% by buying a place, the only issue is I need a deposit in the first place.
  - bootcode 8y ago
    I didn't do the math, but know people who did and got that the initial deposit is a real game changer. Assuming we pay the same for mortgage and rent, who wouldn't want to pay rather mortgage? But remember, to pay the same, there was a huge downpayment. If you were to invest that rationally, long term returns could be worth it, even while paying rent. OTOH, rational investing (in a balanced fund portfolio) is hard, and mortgage forces you to save. YMMV, do your math.
    - gambiting 8y ago
      There's lots of other factors to take into account though. I guess I was really unlucky, and had to move relatively frequently in the last 8 years(on average once a year) - the cost of moving is easily £1500-2000, just in agency fees and moving fees and everything else. That makes renting even more expensive. And then I definitely want to own my house before brexit, as an immigrant I will not risk not being able to rent if things go tits up.
  - deleted 8y ago
    [deleted]
AlexandrB 8y ago
> After 30 years of paying rent, holding all else constant, one still owns nothing. Nothing except all the money saved on property taxes, maintenance and repairs, home insurance, etc. And, as another poster noted, this assumes mortgage payments similar to rental prices. The math on home ownership is not a slam dunk in favor of owning in every region and should be considered carefully.
- s73v3r_ 8y ago
  Yeah, but a mortgage payment stays constant through those 30 years, assuming you didn't get an adjustable rate. Rents rise every year.
  - deleted 8y ago
    [deleted]
- AnimalMuppet 8y ago
  If your rent doesn't cover the property taxes, maintenance and repairs, and home insurance, the owner is going broke.
  - mswiss 8y ago
    yes, but that doesn't mean that someone could buy a house right now and provide the same deal as the existing owner. The existing owner could have bought while interest rates were higher and prices were lower and refinanced down to a much lower monthly payment.

nikanj 8y ago

As long as zoning and housing markets remain as dysfunctional as they are, you get to enjoy the benefits of housing going up 20+% per year. Leverage to the hilt, get a million-dollar home, keep it for three years, pocket a cool 500k. Obviously this time it's different, and housing shall continue it's spectacular bull run forever.

mac01021 8y ago
This is only happening in a handful of cities, though, right?
- nikanj 8y ago
  Pretty much all cities above a certain size, at least in the "west". Not sure how it's on other parts of the planet. Populations are migrating to cities en masse, which creates huge demand for city housing. And most cities haven't really been keeping up with the supply side since the 1930s or so.