7 ms·

>Going into debt at the lowest interest rate you'll ever be offered to buy a leveraged asset that's likely to increase in price and reduce the overhead you pay

>Going into debt at the lowest interest rate you'll ever be offered to buy a leveraged asset that's likely to increase in price and reduce the overhead you pay on your largest expense, housing, and hedge against the risk of rent increases and security against the whims of landlords? Look, if I had enough money around, I'd maybe consider the gamble. But I don't want to buy property to sell it later, I just want to live somewhere. I'm not interested in placing bets on my salary, and I'm not interested in financial longterm-obligations. Maybe in 10 years I want a year off? What then? Maybe I want to change careers to something less intellectually demanding. Maybe I want to spend 50 hours a week with my kids. None of those are feasible if I need the salary. "No debt" is synonymous to freedom on so many levels in life design. The choice is not even close to me. I make enough money not to worry about rent, even if it should substantially increase, which I don't see happening anyway, simply because then most people wouldn't be able to afford it and political change would become opportune in election-based systems. >If you owned a house in London Whats the point of even thinking about owning a house in London? Seriously. I come from uneducated parents that left me €0 and completely unprepared for life, so in my 20s, I first had to dig myself out of that crap. Now I make a good living, but I'm not rich, or filthy rich, or even wealthy. I have to actually make the money to pay that thing. Look at the development of real estate prices in the last 20 years and tell me that's a reasonable choice if I don't even intend to sell the property later (just to be stuck in the same situation again, with more cash, but in the same dilemma). It's pointless. I don't treat my lifetime-expenses as a game of assets, I opt for quality of life, which I don't achieve by giving it all to some property-owning entity who sells it to me at 3 times the price they paid a couple decades ago. I mean, you can justify doing so, but I don't see me being able to justify it.

lmt55 4y ago
If in 10 years you want a year off is your landlord going to give you one?
- bombcar 4y ago
  I think he’s saying that in ten years he can stop renting and shove everything into a storage unit and go travel. The rent/but dichotomy really comes down to what axis of “freedom” you want to optimize for, and if you want to stay in the house and area more than 10 years.
  - ClumsyPilot 4y ago
    "think he’s saying that in ten years he can stop renting and shove everything into a storage unit and go travel." He can rent out the house and travel. And probably make money. Aibnb or estate agents, managed properties, whatever.
Beldin 4y ago
Around here, monthly rent is as high as or higher than mortgage payments. With mortgage payments, you accrue ownership (for the "standard" mortgages around here). If you expect house prices to remain stable or increase during your residency in a property, ownership financially makes more sense.
- antiframe 4y ago
  Why do people compare monthly mortgage amount and rent? It misses several big elements to housing costs: taxes, maintenance, closing costs, realtor costs, and opportunity cost of the money tied up. Renting vs buying comparisons need to account for lot more than those two numbers but that's all I see posted most of the time.
  - mbg721 4y ago
    Maintenance is a big one. When you pay for an apartment, you're also paying for the landlord to fix plumbing/electrical/whatever issues.
    - ChuckNorris89 4y ago
      >When you pay for an apartment, you're also paying for the landlord to fix plumbing/electrical/whatever issues. Not always, in some EU countries, some rental agreements have the tenant pay for certain maintenance, plus insurance.
  - almost_usual 4y ago
    You can write off a good chunk of the interest paid on a mortgage come tax season. Saved me thousands of dollars in taxes this year.
  - rchaud 4y ago
    Many banks set up blended payments so your mortgage payments include property tax. Closing costs occur at the time of purchase and are one-time fees, not recurring. As for the opportunity cost, it's only relevant if your mortgage+taxes are higher than what you were paying in rent. The big unpredictable element is home repair costs.
ilammy 4y ago
> I'm not interested in placing bets on my salary That's exactly what you already do if you're renting: you're betting that you will be able to work and earn enough salary to afford the rent, with your adjusted expenses. That's "pfft easy" when you're in 20's, easy in your 30's, okay in your 40's (kids need money, yo), doable in your 50's, oh shit when you're 52 because surprise! economic downturn / medical emergency / anything else that might happen. And now you don't have a place to live in and spending your retirement money to rent one, or take a dip in your quality of life. If you're not paying for your mortgage, you're likely paying for one of your landlord.
- jjav 4y ago
  > And now you don't have a place to live in and spending your retirement money to rent one, or take a dip in your quality of life. As you say, keeping up with rent is easy (not necessarily, but for those in professional careers) early in life, but as your income plateaus later in your career it starts to become harder to keep up with relentless rent increases. But then it's in retirement that a lifetime of renting really hurts. Suddenly you have no income anymore other than whatever small retirement benefits if any, but rents keep going up.
  - ac29 4y ago
    > But then it's in retirement that a lifetime of renting really hurts. That assumes that the mortgage (+tax, +maintenance, +etc) is the same cost or less than renting is. That almost certainly isnt the case at first - at least in the area I live, I see houses renting for far less than just the interest on the mortgage would be (if purchased today, presumably the owners bought at lower prices and/or lower interest rates).
    - jjav 4y ago
      > That almost certainly isnt the case at first Agreed, at first the monthly cost of ownership is likely higher than rent. But my quoted comment was about retirement age, which is at the tail end, not at first. It doesn't take long for rent to catch up and from there on rent will forever go up while the mortgage will either stay fixed or only go down via refinances. Even if refinancing doesn't work (in a rising rate market like right now) the mortgage is effectively going down via inflation while rents keep up with inflation. In my case the first year of ownership was fairly painful as the cost was much higher than previous rent (although for a nicer place). By the second year was able to refinance so it wasn't bad anymore. By the third year, with rents rising, my mortgage was already about par with local rents. Ever since then, rents have gone up massively (about 4x-5x) and my mortgage has only gone down (today about 30% of the inital monthly payment in absolute dollars, or effectively only about 15% considering inflation). Most importantly, it will be paid off before I retire so once I'm on a limited fixed income that's one monthly cost I won't have to worry about. Having seen some forever-renter extended family reach retirement age with rising rents, it's a sad and painful situation. My advice to anyone is that unless you hate your future self, buy a house in your 30s if at all possible.
darrenf 4y ago
I spent most of my 20s thinking, man, fuck home ownership, I'm gonna rent forever (to my knowledge, no-one in my family had ever owned; I grew up in charity housing and inherited nothing at all). Then I got booted out of a place because the landlord wanted to sell. They offered it to me first, but I had no savings for a deposit. The same story played out amongst my friends, repeatedly, and it totally changed my mind. It wasn't rent increases that were worrisome or painful, it was being forced to move. I wanted to find somewhere I liked and bloody stay there, a literal impossibility all the while I rented. But if I could get a deposit together† then ownership would do it - plus it was revelatory to me that my mortgage payments would be less than the rents I'd been paying AND I could have them fixed for 10 whole years. I didn't buy because it was a step onto the property ladder. I bought because it was less of a gamble than renting. I ended up staying in my first house for 17 years, whereas my record under a single landlord was 3. > Maybe in 10 years I want a year off? What then? Maybe I want to change careers to something less intellectually demanding. Maybe I want to spend 50 hours a week with my kids. None of those are feasible if I need the salary. During those 17 years I took at least two pay cuts, and multiple 2-6 month breaks between jobs, all affordable because I owned rather than rented. Lower outgoings made it possible to save more, plus my mortgage provider offers payment holidays. No landlord ever did! > I opt for quality of life, which I don't achieve by giving it all to some property-owning entity who sells it to me at 3 times the price they paid a couple decades ago. I mean, isn't "paying rent to a private landlord" doing just that? Except "sells it to me" is actually "allows me to live there, until they decide not to" and all the money you spent is gone. † I lucked out with a lump sum/windfall through my employer; I'm making no claims that getting a deposit is easy/attainable
- jjav 4y ago
  > and multiple 2-6 month breaks between jobs, all affordable because I owned rather than rented Indeed! I've taken a long break from working to be with my child, which I could afford to do only because I'd bought a home years earlier. If I'd been renting with ever-increasing rents I never could have done that.
- throw8383833jj 4y ago
  house ownership is just a legal construct. you don't really own the house, even when it's paid off. even if you own, and pay off the entire house, you'll still have to pay "rent" in the form of property taxes, an unfortunate reality.
matwood 4y ago
> I just want to live somewhere Same. Which is exactly why I bought a house in 2011. In hindsight it was the perfect time, but at the time the market was still bumpy. At the end of the day, I had a stable job and needed to live somewhere. > I make enough money not to worry about rent, even if it should substantially increase The house next door to me rents for 2.5x my mortgage. My salary has continued to go up, while my cost to live has continued to go down (I refied at the rate bottom). If I want to take a year off I can either rent out my house or just carry the cost at this point. Buying this house gave my wife and I more flexibility because with some decent certainty (+/- small amounts for taxes/insurance fluctuations) I can tell you what my cost to live will be next month or 24 months from now. Finally, buying a house with a mortgage is best way for a normal person to protect against inflation. Housing is typically a families #1 or #2 expense, and being able to mostly lock that cost is a huge win 3-5-10 years out.
- lotsofpulp 4y ago
  >Same. Which is exactly why I bought a house in 2011. In hindsight it was the perfect time, but at the time the market was still bumpy. At the end of the day, I had a stable job and needed to live somewhere. And you were more likely to be able to because it was 2011. Fewer people can do the same today, at least at a similar comfort level of cost of house to income ratio.
  - matwood 4y ago
    Sure, but what about 1-2-3 years ago? The person I responded to said they never saw the point of taking on 30 years of debt, so my response was in more general terms. Also, 2011 was still very uncertain. Would the market continue to go down, and would I keep my job were all real questions. Is today a questionable time to buy? Probably, but what type of correction is needed in a ~7% inflationary environment for it to shift into an ok time to buy? 10%? 20%? The point is there is always uncertainty and only in hindsight did 2011 look like a great time.
foobarian 4y ago
You seem like an engineer, so you should be able to start up a spreadsheet, put down a bunch of reasonable numbers, and project forward 20-30-40 years and see what makes sense for you. If a loan is involved, read up on the IPMT Excel/Google Sheets function! [1] I don't know how things work where you are, but here in the US if you are renting, you are essentially helping someone else pay their debt. And they can kick you out when they please. The main benefit is that you can stop paying on a much shorter time scale (1yr lease contract?) or take time off, but if you don't rent you should require a smaller cash flow which should be possible to save up for. One last thing, don't forget that you can sell the property in the future (or even rent it out, hence letting someone else pay YOUR debt). That should factor in your cost/benefit calculations. Even if it does not appreciate at crazy rates like the current insane market has led us to expect, it will very likely be a lot more than zero. [1] https://support.google.com/docs/answer/3093175?hl=en https://support.google.com/docs/answer/3093175?hl=en
jjav 4y ago
> "No debt" is synonymous to freedom on so many levels in life design. No debt is indeed great freedom in general. But housing is different. Do you plan to live somewhere? You still have to pay for it. For as long as you live you'll need to live somewhere and that means paying for it. Whether you call it rent or mortgage, you're still paying, there's no escape. So, within those constraints, it is better to invest in a house than to enrich someone else for the rest of your life.
possiblelion 4y ago
I just wanted to say that I agree 100% with your worldview. It's hard to explain it here often. Maybe it's a Protestant thing? From Estonia here.

lmt55 4y ago

If in 10 years you want a year off is your landlord going to give you one?

bombcar 4y ago
I think he’s saying that in ten years he can stop renting and shove everything into a storage unit and go travel. The rent/but dichotomy really comes down to what axis of “freedom” you want to optimize for, and if you want to stay in the house and area more than 10 years.
- ClumsyPilot 4y ago
  "think he’s saying that in ten years he can stop renting and shove everything into a storage unit and go travel." He can rent out the house and travel. And probably make money. Aibnb or estate agents, managed properties, whatever.

Beldin 4y ago

Around here, monthly rent is as high as or higher than mortgage payments. With mortgage payments, you accrue ownership (for the "standard" mortgages around here). If you expect house prices to remain stable or increase during your residency in a property, ownership financially makes more sense.

antiframe 4y ago
Why do people compare monthly mortgage amount and rent? It misses several big elements to housing costs: taxes, maintenance, closing costs, realtor costs, and opportunity cost of the money tied up. Renting vs buying comparisons need to account for lot more than those two numbers but that's all I see posted most of the time.
- mbg721 4y ago
  Maintenance is a big one. When you pay for an apartment, you're also paying for the landlord to fix plumbing/electrical/whatever issues.
  - ChuckNorris89 4y ago
    >When you pay for an apartment, you're also paying for the landlord to fix plumbing/electrical/whatever issues. Not always, in some EU countries, some rental agreements have the tenant pay for certain maintenance, plus insurance.
- almost_usual 4y ago
  You can write off a good chunk of the interest paid on a mortgage come tax season. Saved me thousands of dollars in taxes this year.
- rchaud 4y ago
  Many banks set up blended payments so your mortgage payments include property tax. Closing costs occur at the time of purchase and are one-time fees, not recurring. As for the opportunity cost, it's only relevant if your mortgage+taxes are higher than what you were paying in rent. The big unpredictable element is home repair costs.

ilammy 4y ago

> I'm not interested in placing bets on my salary That's exactly what you already do if you're renting: you're betting that you will be able to work and earn enough salary to afford the rent, with your adjusted expenses. That's "pfft easy" when you're in 20's, easy in your 30's, okay in your 40's (kids need money, yo), doable in your 50's, oh shit when you're 52 because surprise! economic downturn / medical emergency / anything else that might happen. And now you don't have a place to live in and spending your retirement money to rent one, or take a dip in your quality of life. If you're not paying for your mortgage, you're likely paying for one of your landlord.

jjav 4y ago
> And now you don't have a place to live in and spending your retirement money to rent one, or take a dip in your quality of life. As you say, keeping up with rent is easy (not necessarily, but for those in professional careers) early in life, but as your income plateaus later in your career it starts to become harder to keep up with relentless rent increases. But then it's in retirement that a lifetime of renting really hurts. Suddenly you have no income anymore other than whatever small retirement benefits if any, but rents keep going up.
- ac29 4y ago
  > But then it's in retirement that a lifetime of renting really hurts. That assumes that the mortgage (+tax, +maintenance, +etc) is the same cost or less than renting is. That almost certainly isnt the case at first - at least in the area I live, I see houses renting for far less than just the interest on the mortgage would be (if purchased today, presumably the owners bought at lower prices and/or lower interest rates).
  - jjav 4y ago
    > That almost certainly isnt the case at first Agreed, at first the monthly cost of ownership is likely higher than rent. But my quoted comment was about retirement age, which is at the tail end, not at first. It doesn't take long for rent to catch up and from there on rent will forever go up while the mortgage will either stay fixed or only go down via refinances. Even if refinancing doesn't work (in a rising rate market like right now) the mortgage is effectively going down via inflation while rents keep up with inflation. In my case the first year of ownership was fairly painful as the cost was much higher than previous rent (although for a nicer place). By the second year was able to refinance so it wasn't bad anymore. By the third year, with rents rising, my mortgage was already about par with local rents. Ever since then, rents have gone up massively (about 4x-5x) and my mortgage has only gone down (today about 30% of the inital monthly payment in absolute dollars, or effectively only about 15% considering inflation). Most importantly, it will be paid off before I retire so once I'm on a limited fixed income that's one monthly cost I won't have to worry about. Having seen some forever-renter extended family reach retirement age with rising rents, it's a sad and painful situation. My advice to anyone is that unless you hate your future self, buy a house in your 30s if at all possible.

darrenf 4y ago

I spent most of my 20s thinking, man, fuck home ownership, I'm gonna rent forever (to my knowledge, no-one in my family had ever owned; I grew up in charity housing and inherited nothing at all). Then I got booted out of a place because the landlord wanted to sell. They offered it to me first, but I had no savings for a deposit. The same story played out amongst my friends, repeatedly, and it totally changed my mind. It wasn't rent increases that were worrisome or painful, it was being forced to move. I wanted to find somewhere I liked and bloody stay there, a literal impossibility all the while I rented. But if I could get a deposit together† then ownership would do it - plus it was revelatory to me that my mortgage payments would be less than the rents I'd been paying AND I could have them fixed for 10 whole years. I didn't buy because it was a step onto the property ladder. I bought because it was less of a gamble than renting. I ended up staying in my first house for 17 years, whereas my record under a single landlord was 3. > Maybe in 10 years I want a year off? What then? Maybe I want to change careers to something less intellectually demanding. Maybe I want to spend 50 hours a week with my kids. None of those are feasible if I need the salary. During those 17 years I took at least two pay cuts, and multiple 2-6 month breaks between jobs, all affordable because I owned rather than rented. Lower outgoings made it possible to save more, plus my mortgage provider offers payment holidays. No landlord ever did! > I opt for quality of life, which I don't achieve by giving it all to some property-owning entity who sells it to me at 3 times the price they paid a couple decades ago. I mean, isn't "paying rent to a private landlord" doing just that? Except "sells it to me" is actually "allows me to live there, until they decide not to" and all the money you spent is gone. † I lucked out with a lump sum/windfall through my employer; I'm making no claims that getting a deposit is easy/attainable

jjav 4y ago
> and multiple 2-6 month breaks between jobs, all affordable because I owned rather than rented Indeed! I've taken a long break from working to be with my child, which I could afford to do only because I'd bought a home years earlier. If I'd been renting with ever-increasing rents I never could have done that.
throw8383833jj 4y ago
house ownership is just a legal construct. you don't really own the house, even when it's paid off. even if you own, and pay off the entire house, you'll still have to pay "rent" in the form of property taxes, an unfortunate reality.

matwood 4y ago

> I just want to live somewhere Same. Which is exactly why I bought a house in 2011. In hindsight it was the perfect time, but at the time the market was still bumpy. At the end of the day, I had a stable job and needed to live somewhere. > I make enough money not to worry about rent, even if it should substantially increase The house next door to me rents for 2.5x my mortgage. My salary has continued to go up, while my cost to live has continued to go down (I refied at the rate bottom). If I want to take a year off I can either rent out my house or just carry the cost at this point. Buying this house gave my wife and I more flexibility because with some decent certainty (+/- small amounts for taxes/insurance fluctuations) I can tell you what my cost to live will be next month or 24 months from now. Finally, buying a house with a mortgage is best way for a normal person to protect against inflation. Housing is typically a families #1 or #2 expense, and being able to mostly lock that cost is a huge win 3-5-10 years out.

lotsofpulp 4y ago
>Same. Which is exactly why I bought a house in 2011. In hindsight it was the perfect time, but at the time the market was still bumpy. At the end of the day, I had a stable job and needed to live somewhere. And you were more likely to be able to because it was 2011. Fewer people can do the same today, at least at a similar comfort level of cost of house to income ratio.
- matwood 4y ago
  Sure, but what about 1-2-3 years ago? The person I responded to said they never saw the point of taking on 30 years of debt, so my response was in more general terms. Also, 2011 was still very uncertain. Would the market continue to go down, and would I keep my job were all real questions. Is today a questionable time to buy? Probably, but what type of correction is needed in a ~7% inflationary environment for it to shift into an ok time to buy? 10%? 20%? The point is there is always uncertainty and only in hindsight did 2011 look like a great time.

foobarian 4y ago

You seem like an engineer, so you should be able to start up a spreadsheet, put down a bunch of reasonable numbers, and project forward 20-30-40 years and see what makes sense for you. If a loan is involved, read up on the IPMT Excel/Google Sheets function! [1] I don't know how things work where you are, but here in the US if you are renting, you are essentially helping someone else pay their debt. And they can kick you out when they please. The main benefit is that you can stop paying on a much shorter time scale (1yr lease contract?) or take time off, but if you don't rent you should require a smaller cash flow which should be possible to save up for. One last thing, don't forget that you can sell the property in the future (or even rent it out, hence letting someone else pay YOUR debt). That should factor in your cost/benefit calculations. Even if it does not appreciate at crazy rates like the current insane market has led us to expect, it will very likely be a lot more than zero. [1] https://support.google.com/docs/answer/3093175?hl=en https://support.google.com/docs/answer/3093175?hl=en

jjav 4y ago

> "No debt" is synonymous to freedom on so many levels in life design. No debt is indeed great freedom in general. But housing is different. Do you plan to live somewhere? You still have to pay for it. For as long as you live you'll need to live somewhere and that means paying for it. Whether you call it rent or mortgage, you're still paying, there's no escape. So, within those constraints, it is better to invest in a house than to enrich someone else for the rest of your life.

possiblelion 4y ago

I just wanted to say that I agree 100% with your worldview. It's hard to explain it here often. Maybe it's a Protestant thing? From Estonia here.