4 ms·

I don't think that's entirely fair. When I bought my house 6 years ago I looked at the monthly payment and compared it to rent in the area. For my mortgage (and

I don't think that's entirely fair. When I bought my house 6 years ago I looked at the monthly payment and compared it to rent in the area. For my mortgage (and a small down payment) at the time I could rent something like a fairly run down three bedroom apartment or I could own a run down three bedroom house. If you can live somewhere for free you can think about it in those terms (and I think about smaller purchases like cars in those terms) but the monthly payment is a big factor when looking at alternatives. That house has gone up 50% according to Zillow but I wasn't planning on that, I just figured it was worth the down payment and upkeep to have the peace of mind that you wont get evicted because someone else bought the place and maybe get a little something when I move.

irrational 4y ago
My monthly mortgage payment on a nearly 4,000 sq foot home on nearly an acre is about the same as local monthly rental of a 2 bedroom apartment. I can't decide if I got a deal or if local rental prices are crazy high.
- kube-system 4y ago
  The house across the street from me rents for 2x my mortgage.
  - rnk 4y ago
    A lot of people can't afford the down payment to reduce the monthly payments. Plus the endless rumors of hedge funds buying up all the houses w cash to force renting, reduce supply.
ryandrake 4y ago
One mistake a lot of people make is comparing their monthly mortgage payment to rent. You're not comparing apples to apples. You should be comparing only the interest portion of the payment to rent. The principal portion is money you're paying back into your own pocket in the form of home equity. Your actual "money that goes away like rent" expense is the interest. When you use this as your comparison, a lot more rent-vs-buy decisions swing over to "buy". Of course you also need to factor in amortized taxes, maintenance, and so on, but mortgage principal is not an expense. EDIT: Plus, if you want to get even more exact, you should be comparing the interest portion minus the tax deduction to rent, because (at least in the US) the government lets you deduct mortgage interest from your income.
- loeg 4y ago
  You can discount the principal payments somewhat, too, because you'll lose 10% of total value selling.
  - rnk 4y ago
    Why do you lose 10% selling? 6% for real estate cartel commission I guess. If you are in a hot market you can use redfin or similar low rate companies, don't pay the buyers agent. I'm trying to talk myself into it. No one is doing $60k of work selling your million dollar place.
    - loeg 4y ago
      6% to the cartel and another 3-4% in other transaction fees (title fees and insurance, excise tax, etc).
- ar_lan 4y ago
  Rent vs Buy has fairly standard calculators, especially when you're wealthy enough to factor in opportunity cost. If you're able to take a 30 year loan w/ a 2.7% interest rate and invest the rest of the equity, your house is cheaper than someone who buys it outright in cash. The only time I would disagree with you, however, is for poor people. "Mortgage principle is not an expense" is correct over a long-horizon, but families living month-to-month that somehow managed to purchase a house are severely unlikely to be able to really capitalize on any value generated from that. I think your comment primarily applies to upper middle-class and wealthy people.
  - bombcar 4y ago
    The key for the people who are poor is they need to stay in the house much longer than normal, so that they begin to get the advantages of inflation and growing principle payments. But the working poor are also the most likely to have to change jobs, which either forces them into a long commute or having to sell the house before they're really built any equity.
- 4y ago

irrational 4y ago

My monthly mortgage payment on a nearly 4,000 sq foot home on nearly an acre is about the same as local monthly rental of a 2 bedroom apartment. I can't decide if I got a deal or if local rental prices are crazy high.

kube-system 4y ago
The house across the street from me rents for 2x my mortgage.
- rnk 4y ago
  A lot of people can't afford the down payment to reduce the monthly payments. Plus the endless rumors of hedge funds buying up all the houses w cash to force renting, reduce supply.

ryandrake 4y ago

One mistake a lot of people make is comparing their monthly mortgage payment to rent. You're not comparing apples to apples. You should be comparing only the interest portion of the payment to rent. The principal portion is money you're paying back into your own pocket in the form of home equity. Your actual "money that goes away like rent" expense is the interest. When you use this as your comparison, a lot more rent-vs-buy decisions swing over to "buy". Of course you also need to factor in amortized taxes, maintenance, and so on, but mortgage principal is not an expense. EDIT: Plus, if you want to get even more exact, you should be comparing the interest portion minus the tax deduction to rent, because (at least in the US) the government lets you deduct mortgage interest from your income.

loeg 4y ago
You can discount the principal payments somewhat, too, because you'll lose 10% of total value selling.
- rnk 4y ago
  Why do you lose 10% selling? 6% for real estate cartel commission I guess. If you are in a hot market you can use redfin or similar low rate companies, don't pay the buyers agent. I'm trying to talk myself into it. No one is doing $60k of work selling your million dollar place.
  - loeg 4y ago
    6% to the cartel and another 3-4% in other transaction fees (title fees and insurance, excise tax, etc).
ar_lan 4y ago
Rent vs Buy has fairly standard calculators, especially when you're wealthy enough to factor in opportunity cost. If you're able to take a 30 year loan w/ a 2.7% interest rate and invest the rest of the equity, your house is cheaper than someone who buys it outright in cash. The only time I would disagree with you, however, is for poor people. "Mortgage principle is not an expense" is correct over a long-horizon, but families living month-to-month that somehow managed to purchase a house are severely unlikely to be able to really capitalize on any value generated from that. I think your comment primarily applies to upper middle-class and wealthy people.
- bombcar 4y ago
  The key for the people who are poor is they need to stay in the house much longer than normal, so that they begin to get the advantages of inflation and growing principle payments. But the working poor are also the most likely to have to change jobs, which either forces them into a long commute or having to sell the house before they're really built any equity.
4y ago