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Homeownership is a great ideal. Letting people work towards having a place to live without paying rent is great for independence. What is stupid is promoting H

by rocqua 5y ago

Homeownership is a great ideal. Letting people work towards having a place to live without paying rent is great for independence. What is stupid is promoting Homeownership as a personal investment for the individual home-owner. A home is already a great thing to own financially, because it 'produces' not having to pay rent. There is no need to also have it pay 5% a year for people who have 100% leverage (which is very common in the Netherlands for mortgages). But politicians get lots of votes by making the current middle class richer for owning homes. Nevermind that it is bad long-term as people have been saying for the last 20 years.

refurb 5y ago
In a perfect market where there was always enough housing and rental units to supply the demand, rent would just end up settling at the same price as owning. See price vs rent index.
wallacoloo 5y ago
Just a note that 100% leverage would mean that you’re borrowing against 100% of the portion of the asset you bought to purchase more of the asset. I.e. you put 50% money down and borrowed to buy the other 50%. A typical 20% down-payment in the US gets you 400% leverage (you used your 20% ownership 4 times over in order to purchase the other 80%). 5% down gets you 1900% leverage. If you put $50000 down (5%) on a $1M home, it rises by 1% ($10000) and you sell it, then you just made a 20% return on your initial investment. You were leveraged 1900%, and so you got a return 1900% above what you would have without borrowing any $. Nobody serious advises that kind of leverage on any asset except for real-estate, AFAIK.
- rocqua 5y ago
  True, my bad. In that case, Dutch mortgages allow "infinite" leverage. There are some fixed cost: transfer tax, mortgage fee, notary fees, etc. (It used to be you could also finance these). But the full amount that will be transferred to the seller can be financed.

by rocqua 5y ago

refurb 5y ago

In a perfect market where there was always enough housing and rental units to supply the demand, rent would just end up settling at the same price as owning. See price vs rent index.

wallacoloo 5y ago

Just a note that 100% leverage would mean that you’re borrowing against 100% of the portion of the asset you bought to purchase more of the asset. I.e. you put 50% money down and borrowed to buy the other 50%. A typical 20% down-payment in the US gets you 400% leverage (you used your 20% ownership 4 times over in order to purchase the other 80%). 5% down gets you 1900% leverage. If you put $50000 down (5%) on a $1M home, it rises by 1% ($10000) and you sell it, then you just made a 20% return on your initial investment. You were leveraged 1900%, and so you got a return 1900% above what you would have without borrowing any $. Nobody serious advises that kind of leverage on any asset except for real-estate, AFAIK.

rocqua 5y ago
True, my bad. In that case, Dutch mortgages allow "infinite" leverage. There are some fixed cost: transfer tax, mortgage fee, notary fees, etc. (It used to be you could also finance these). But the full amount that will be transferred to the seller can be financed.