7 ms·

If you're not paying off the principal, you're just renting from the bank without the benefit of having a landlord to fix things. Why bother?

alkonaut 6y ago
> If you're not paying off the principal, you're just renting from the bank without the benefit of having a landlord to fix things. Renting a house is more or less unheard of. If I want a house I need to buy one (or: “rent from the bank” as it were) And the market price is basically “what two high income earners can afford if they pay interest only”. So: if I want to live in a house at all, I need to buy it using borrowed money, and in the window I expect to live in a house (say 10-25 years) I couldn’t make a large dent in the principal regardless, because of the extremely low interest rates (around 1% now for mortgages) and the high prices that come from that. I don’t like it, but I don’t have a choice. Also regulations strongly favor buying with borrowed money over renting. Interest can be deducted while those who rent from a landlord obviously pay interest too - indirectly through their rent - but in their case it isn’t deductible. So anyone who is forced to rent (e.g because they can’t afford the huge 15-20% down payment or aren’t paid enough to get the mortgage) is pretty much subsidizing the tax deductions of those who take mortgages.
- llampx 6y ago
  Interest is not deductible in Germany., Unlike the US.
  - pmh 6y ago
    Since the tax changes in 2017, it's effectively not deductible in the US for most
  - alkonaut 5y ago
    Yes I’m sure I would have a completely different calculation if I was in Germany.
flukus 6y ago
Rents increase with inflation, a mortgage doesn't. I have a few older friends kicking themselves for not buying a property when they could afford it, rents have risen and there is a very real prospect that they will have to move out of the community they spent their lives in.
- allendoerfer 5y ago
  Mortages do increase with faster growing inflation, though, once the central bank reacts and increases the interest rates. Of course you can negotiate a fixed interest rate for some time period. So there are two buffers in between.
- indemnity 5y ago
  Not to mention, if you live in any Western country, real estate capital gains since 2010 have been immense, so interest-only mortgages could have made sense.

alkonaut 6y ago

> If you're not paying off the principal, you're just renting from the bank without the benefit of having a landlord to fix things. Renting a house is more or less unheard of. If I want a house I need to buy one (or: “rent from the bank” as it were) And the market price is basically “what two high income earners can afford if they pay interest only”. So: if I want to live in a house at all, I need to buy it using borrowed money, and in the window I expect to live in a house (say 10-25 years) I couldn’t make a large dent in the principal regardless, because of the extremely low interest rates (around 1% now for mortgages) and the high prices that come from that. I don’t like it, but I don’t have a choice. Also regulations strongly favor buying with borrowed money over renting. Interest can be deducted while those who rent from a landlord obviously pay interest too - indirectly through their rent - but in their case it isn’t deductible. So anyone who is forced to rent (e.g because they can’t afford the huge 15-20% down payment or aren’t paid enough to get the mortgage) is pretty much subsidizing the tax deductions of those who take mortgages.

llampx 6y ago
Interest is not deductible in Germany., Unlike the US.
- pmh 6y ago
  Since the tax changes in 2017, it's effectively not deductible in the US for most
- alkonaut 5y ago
  Yes I’m sure I would have a completely different calculation if I was in Germany.

flukus 6y ago

Rents increase with inflation, a mortgage doesn't. I have a few older friends kicking themselves for not buying a property when they could afford it, rents have risen and there is a very real prospect that they will have to move out of the community they spent their lives in.

allendoerfer 5y ago
Mortages do increase with faster growing inflation, though, once the central bank reacts and increases the interest rates. Of course you can negotiate a fixed interest rate for some time period. So there are two buffers in between.
indemnity 5y ago
Not to mention, if you live in any Western country, real estate capital gains since 2010 have been immense, so interest-only mortgages could have made sense.