3 ms·

If you can afford to pay someone else's mortgage + profit (through rent) you can afford to buy.

russellendicott 5y ago
But for 30 years straight?
awillen 5y ago
C'mon, you have to see the flaw in this. There's a difference between making a monthly payment and having a large amount saved up.
rmk 5y ago
You are assuming that your rental payment > mortgage payment based on current market value of the property. That's absolutely not the case in the majority of situations (which is why people choose to rent vs. own: you can live in a property that you would never be able to afford to buy, if you choose to rent). Rents are often a good deal because the landlord does not want to sell, but have a source of passive income, have the house be occupied and close to cash-flow positive while it grows in value over decades (a nice nest-egg) etc. You truly can not determine if you can afford to buy a place until you take a multitude of factors into account, and they vary for each person and each property.
hansvm 5y ago
That's apples to oranges even looking just at marginal costs; you're comparing "past mortgages and current profits" to "current mortgages." That's a reasonable approximation some places, but right now I'd pay an extra $15k+/yr to mortgage a house equivalent to my apartment. Not to mention, housing has high fixed costs and just isn't available for a lot of people. You need a down payment, various closing costs, proof of decent credit (not just that you haven't defaulted on a loan, but that you've been actively building credit), and ofttimes proof of some moderately high amount of income or sustained bank balance. Even with enough income to make the monthly payments you could still have to save and plan for years to get over the hump of actually buying a home. Once you've actually bought the house, your actual expenses are burstier than when renting. You might get lucky, but if the furnace or something dies in the first couple of years you won't be able to weather that loss if you were just on the cusp of affording home ownership (whereas a renter would be just fine because it's their landlord's problem). Since certain major components of the house are effectively self insured, that raises the bar for initial savings you need to purchase a house with the same financial safety as renting. There's an additional assumption you're glossing over -- that for every apartment there exists an equivalent or worse house. At times when I needed really cheap rent I could grab a 200sq ft studio apartment, but that option isn't readily available for most home buyers. Even assuming buying were feasible for everyone it still wouldn't be close to optimal. The extra fixed costs associated with a home purchase or sale make it much more difficult to move for family issues, school, job opportunities, .... If you're in a situation where you plan to move every couple years then renting is likely cheaper (certainly easier) than purchasing a home, even in places where the rent is higher than an equivalent mortgage. And on and on and on. If you're going to stay somewhere a few years and have a bit of a financial buffer then I totally agree that home ownership is often a good idea. It's not that clear cut for huge swathes of people though.

But for 30 years straight?

C'mon, you have to see the flaw in this. There's a difference between making a monthly payment and having a large amount saved up.

rmk 5y ago

You are assuming that your rental payment > mortgage payment based on current market value of the property. That's absolutely not the case in the majority of situations (which is why people choose to rent vs. own: you can live in a property that you would never be able to afford to buy, if you choose to rent). Rents are often a good deal because the landlord does not want to sell, but have a source of passive income, have the house be occupied and close to cash-flow positive while it grows in value over decades (a nice nest-egg) etc. You truly can not determine if you can afford to buy a place until you take a multitude of factors into account, and they vary for each person and each property.

hansvm 5y ago

That's apples to oranges even looking just at marginal costs; you're comparing "past mortgages and current profits" to "current mortgages." That's a reasonable approximation some places, but right now I'd pay an extra $15k+/yr to mortgage a house equivalent to my apartment. Not to mention, housing has high fixed costs and just isn't available for a lot of people. You need a down payment, various closing costs, proof of decent credit (not just that you haven't defaulted on a loan, but that you've been actively building credit), and ofttimes proof of some moderately high amount of income or sustained bank balance. Even with enough income to make the monthly payments you could still have to save and plan for years to get over the hump of actually buying a home. Once you've actually bought the house, your actual expenses are burstier than when renting. You might get lucky, but if the furnace or something dies in the first couple of years you won't be able to weather that loss if you were just on the cusp of affording home ownership (whereas a renter would be just fine because it's their landlord's problem). Since certain major components of the house are effectively self insured, that raises the bar for initial savings you need to purchase a house with the same financial safety as renting. There's an additional assumption you're glossing over -- that for every apartment there exists an equivalent or worse house. At times when I needed really cheap rent I could grab a 200sq ft studio apartment, but that option isn't readily available for most home buyers. Even assuming buying were feasible for everyone it still wouldn't be close to optimal. The extra fixed costs associated with a home purchase or sale make it much more difficult to move for family issues, school, job opportunities, .... If you're in a situation where you plan to move every couple years then renting is likely cheaper (certainly easier) than purchasing a home, even in places where the rent is higher than an equivalent mortgage. And on and on and on. If you're going to stay somewhere a few years and have a bit of a financial buffer then I totally agree that home ownership is often a good idea. It's not that clear cut for huge swathes of people though.