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Why do people use this phrase? You are paying for a service (somewhere to live). Unless you can afford to buy outright then you’re either “throwing money away”

Why do people use this phrase? You are paying for a service (somewhere to live). Unless you can afford to buy outright then you’re either “throwing money away” renting or on interest payments.

Firmwarrior 4y ago
In a lot of places, mortgage payments are around the same as rent, so if you can "buy" (qualify for a good mortgage) you'll be paying less AND your net worth will be growing Of course, the situation is more complicated in areas like the SF Bay and Seattle. Housing prices vs rent basically assume 5% year over year growth forever, so if you think housing prices will be flat, it's economically advantageous to rent There's a good calculator without a ton of BS here on this old page: https://michaelbluejay.com/house/rentvsbuy.html https://michaelbluejay.com/house/rentvsbuy.html
- gassiss 4y ago
  > In a lot of places, mortgage payments are around the same as rent, so if you can "buy" (qualify for a good mortgage) you'll be paying less AND your net worth will be growing sure you'll be paying less, but you'll also be buying a lot of risk. You don't own anything until it's fully paid, and if the interest rates skyrocket good luck with bankruptcy
  - causi 4y ago
    interest rates skyrocket good luck with bankruptcy What kind of lunatic doesn't get a fixed-rate mortgage?
    - pharmakom 4y ago
      This is the norm outside of the US
    - imtringued 4y ago
      What kind of lunatic offers a fixed rate mortgage for 30 years? If people knew anything about banking they would realize that this type of mortgage can only exist in the form of a government subsidy.
- lazide 4y ago
  FYI - that hasn’t been true for several years in most of the country.
OscarCunningham 4y ago
And if you buy outright you're throwing your money away on opportunity costs. That money could be in the stock market.
- scarface74 4y ago
  You’re assuming that a mortgage is always more expensive than rent. Your rent is going to go up. My mortgage isn’t. To put things in perspective, my parents had a mortgage of $600/month in 1978. It wasn’t too much of stretch for them then. But it did sting. They were a teacher and a factory worker. By the time they paid the house off in 2008, $700 by then was laughably small.
  - lumost 4y ago
    This is a vastly underestimated component of why owning makes more sense than renting for the majority of the population. Practically, you are unlikely to make more than 2x your starting compensation from school. Rental costs are somewhat sticky at around ~25-50% of your income depending on your preferences. You can save money, and live frugally. But a good chunk of your future disposable cash flow is going to come from fixing your housing costs.
    - scarface74 4y ago
      > Practically, you are unlikely to make more than 2x your starting compensation from school I wouldn’t go that far. I don’t know what my parents made in 1968 or for that matter 2008. But from the time period I mentioned 1978 - 2008, if their income just kept up with inflation, it would have gone up by 650% according to the official CPI calculator (https://data.bls.gov/cgi-bin/cpicalc.pl?cost1=100&year1=196801&year2=200809 https://data.bls.gov/cgi-bin/cpicalc.pl?cost1=100&year1=1968...). Well actually, they retired in 2002 at 55 and 57 respectively - from teaching and factory work - and have been retired since then. They’ve taken two 5 month long cross country trips and have only slowed down their shorter road trips in the last couple of years because they were worried about Covid
      - 4y ago
bombcar 4y ago
It’s like saying eating at a restaurant or using Uber eats is throwing money away because you could have bought a stove instead. Kinda true kinda not.

Why do people use this phrase? You are paying for a service (somewhere to live). Unless you can afford to buy outright then you’re either “throwing money away” renting or on interest payments.

Firmwarrior 4y ago

In a lot of places, mortgage payments are around the same as rent, so if you can "buy" (qualify for a good mortgage) you'll be paying less AND your net worth will be growing Of course, the situation is more complicated in areas like the SF Bay and Seattle. Housing prices vs rent basically assume 5% year over year growth forever, so if you think housing prices will be flat, it's economically advantageous to rent There's a good calculator without a ton of BS here on this old page: https://michaelbluejay.com/house/rentvsbuy.html https://michaelbluejay.com/house/rentvsbuy.html

gassiss 4y ago
> In a lot of places, mortgage payments are around the same as rent, so if you can "buy" (qualify for a good mortgage) you'll be paying less AND your net worth will be growing sure you'll be paying less, but you'll also be buying a lot of risk. You don't own anything until it's fully paid, and if the interest rates skyrocket good luck with bankruptcy
- causi 4y ago
  interest rates skyrocket good luck with bankruptcy What kind of lunatic doesn't get a fixed-rate mortgage?
  - pharmakom 4y ago
    This is the norm outside of the US
  - imtringued 4y ago
    What kind of lunatic offers a fixed rate mortgage for 30 years? If people knew anything about banking they would realize that this type of mortgage can only exist in the form of a government subsidy.
lazide 4y ago
FYI - that hasn’t been true for several years in most of the country.

OscarCunningham 4y ago

And if you buy outright you're throwing your money away on opportunity costs. That money could be in the stock market.

scarface74 4y ago
You’re assuming that a mortgage is always more expensive than rent. Your rent is going to go up. My mortgage isn’t. To put things in perspective, my parents had a mortgage of $600/month in 1978. It wasn’t too much of stretch for them then. But it did sting. They were a teacher and a factory worker. By the time they paid the house off in 2008, $700 by then was laughably small.
- lumost 4y ago
  This is a vastly underestimated component of why owning makes more sense than renting for the majority of the population. Practically, you are unlikely to make more than 2x your starting compensation from school. Rental costs are somewhat sticky at around ~25-50% of your income depending on your preferences. You can save money, and live frugally. But a good chunk of your future disposable cash flow is going to come from fixing your housing costs.
  - scarface74 4y ago
    > Practically, you are unlikely to make more than 2x your starting compensation from school I wouldn’t go that far. I don’t know what my parents made in 1968 or for that matter 2008. But from the time period I mentioned 1978 - 2008, if their income just kept up with inflation, it would have gone up by 650% according to the official CPI calculator (https://data.bls.gov/cgi-bin/cpicalc.pl?cost1=100&year1=196801&year2=200809 https://data.bls.gov/cgi-bin/cpicalc.pl?cost1=100&year1=1968...). Well actually, they retired in 2002 at 55 and 57 respectively - from teaching and factory work - and have been retired since then. They’ve taken two 5 month long cross country trips and have only slowed down their shorter road trips in the last couple of years because they were worried about Covid
    - 4y ago

bombcar 4y ago

It’s like saying eating at a restaurant or using Uber eats is throwing money away because you could have bought a stove instead. Kinda true kinda not.