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> Spending money you don't have... You basically just described loans. So the mortgage industry. I'm not looking forward to bailing people or companies out fo

by rapind 4y ago

> Spending money you don't have... You basically just described loans. So the mortgage industry. I'm not looking forward to bailing people or companies out for being irresponsible again (referring to 2008 housing, I'm fine with student loan forgiveness).

Spivak 4y ago
I don't think I really disagree with this. Mortgages are so unbelievably stupid and if they weren't the norm wouldn't be invented again. The people taking out mortgages have no idea if they'll have stable income for 15 or 30 years because such a thing is impossible. So long as your ability to pay your mortgage is tied to your ability to work you have no guarantees at all.
- jahewson 4y ago
  That is what mortgage insurance is for.
- crgwbr 4y ago
  So how do you propose anyone ever buys a house, then? Waste money on rent whilst saving for 30 years so they can finally buy a house in cash at age 50? A modestly sized mortgage seems better than that.
  - Spivak 4y ago
    You’re either gonna be wasting money on rent or interest and interest rates are so bad you might be better off with rent. I found a 450k home near me on Zillow. If I put 20% down today with a 30 year mortgage, include property taxes, home owner’s insurance and the $100/mo hoa fee I will spend $550k in interest, $210k in property taxes, $30k in hoa fees and $60k in homeowners insurance or $850k of money that isn’t equity over the lifetime of the loan. My rent is $1400/mo in the same area. Let’s make it $2k to account for some inflation. I will spend $720k over 30 years and all my “equity” actually pays because it’s in the market and not my roof. But wait that’s not at all realistic. I want to own a house! If me and my partner can save 5k/mo (which is actually low since that mortgage was gonna cost us 3.7k a month and be at most 30% of our cash flow) we can buy cash in about 8 years. So we spend $192k in rent to get $450k of equity or we spend $550k to do the same. And this isn’t theoretical either. I’m two years and 130k into this process. I would be further but I had to eat a high six figure medical bill which thankfully didn’t financially ruin me and cost nothing setting my clock back. And if that isn’t the biggest endorsement of this strategy I don’t know what is.
- bruce511 4y ago
  As you point out mortgages can be bad for some people, but equally they are an enormous benefit for others. If your life is "unstable" in the sense that you change address frequently for work reasons, or your income is insecure, then making long term commitments make no sense. On the other hand lots of people live stable, productive lives, and are lucky enough to have good job security, and good financial discipline. Let's call this group the "middle class" - they earn a reasonable salary, with good job security, but don't have access to capital, but equally are not as insecure as the masses living day to day. Providing this group with access to capital has benefits to them, and society as a whole. It encourages long-term decision making and promotes community stability. Ultimately it allows people to "rise up" the economic ladder. On an even longer scale than the mortgage, it provides security. Someone approaching retirement discovers they will forever now live rent-free, or alternatively have accumulated capital that can help fund retirement. If you never get a mortgage you still have to live somewhere, but you'll be paying rent for 50 years, not 20.
- pandaman 4y ago
  Not sure if this is not an ironic comment in line with the topic of this post about Gen Z financial illiteracy.
jemmyw 4y ago
> I'm fine with student loan forgiveness Why? Is that so different? I'd consider owning ones own home via a mortgage to be more sensible than overspending on a student loan. I would agree that higher education shouldn't be the price it is and should be funded. However, student loan forgiveness is kind of back door higher education funding, it's pretty odd.
- rapind 4y ago
  I don’t like bailouts of any sort tbh. I think there should be a post secondary state paid option though. Not because I love paying taxes, but because I think society at large will benefit.

by rapind 4y ago

Spivak 4y ago

I don't think I really disagree with this. Mortgages are so unbelievably stupid and if they weren't the norm wouldn't be invented again. The people taking out mortgages have no idea if they'll have stable income for 15 or 30 years because such a thing is impossible. So long as your ability to pay your mortgage is tied to your ability to work you have no guarantees at all.

jahewson 4y ago
That is what mortgage insurance is for.
crgwbr 4y ago
So how do you propose anyone ever buys a house, then? Waste money on rent whilst saving for 30 years so they can finally buy a house in cash at age 50? A modestly sized mortgage seems better than that.
- Spivak 4y ago
  You’re either gonna be wasting money on rent or interest and interest rates are so bad you might be better off with rent. I found a 450k home near me on Zillow. If I put 20% down today with a 30 year mortgage, include property taxes, home owner’s insurance and the $100/mo hoa fee I will spend $550k in interest, $210k in property taxes, $30k in hoa fees and $60k in homeowners insurance or $850k of money that isn’t equity over the lifetime of the loan. My rent is $1400/mo in the same area. Let’s make it $2k to account for some inflation. I will spend $720k over 30 years and all my “equity” actually pays because it’s in the market and not my roof. But wait that’s not at all realistic. I want to own a house! If me and my partner can save 5k/mo (which is actually low since that mortgage was gonna cost us 3.7k a month and be at most 30% of our cash flow) we can buy cash in about 8 years. So we spend $192k in rent to get $450k of equity or we spend $550k to do the same. And this isn’t theoretical either. I’m two years and 130k into this process. I would be further but I had to eat a high six figure medical bill which thankfully didn’t financially ruin me and cost nothing setting my clock back. And if that isn’t the biggest endorsement of this strategy I don’t know what is.
bruce511 4y ago
As you point out mortgages can be bad for some people, but equally they are an enormous benefit for others. If your life is "unstable" in the sense that you change address frequently for work reasons, or your income is insecure, then making long term commitments make no sense. On the other hand lots of people live stable, productive lives, and are lucky enough to have good job security, and good financial discipline. Let's call this group the "middle class" - they earn a reasonable salary, with good job security, but don't have access to capital, but equally are not as insecure as the masses living day to day. Providing this group with access to capital has benefits to them, and society as a whole. It encourages long-term decision making and promotes community stability. Ultimately it allows people to "rise up" the economic ladder. On an even longer scale than the mortgage, it provides security. Someone approaching retirement discovers they will forever now live rent-free, or alternatively have accumulated capital that can help fund retirement. If you never get a mortgage you still have to live somewhere, but you'll be paying rent for 50 years, not 20.
pandaman 4y ago
Not sure if this is not an ironic comment in line with the topic of this post about Gen Z financial illiteracy.

jemmyw 4y ago

> I'm fine with student loan forgiveness Why? Is that so different? I'd consider owning ones own home via a mortgage to be more sensible than overspending on a student loan. I would agree that higher education shouldn't be the price it is and should be funded. However, student loan forgiveness is kind of back door higher education funding, it's pretty odd.

rapind 4y ago
I don’t like bailouts of any sort tbh. I think there should be a post secondary state paid option though. Not because I love paying taxes, but because I think society at large will benefit.