3 ms·

The biggest real world advantage for the average person for buying a house is forced savings. If a mortgage is $3K and rent is $2K per month, Joe Sixpack is no

by koolba 4y ago

The biggest real world advantage for the average person for buying a house is forced savings. If a mortgage is $3K and rent is $2K per month, Joe Sixpack is not going to save $1K in a sinking fund. He’s going to spend some extra non-zero portion of that money. So in the long run, for average real consumers, not a theoretical economically minded consumer, a mortgage forces frugality.

lnsru 4y ago
Close to my numbers. My old rent plus monthly savings are close to monthly bank payment for my home. My real consumption is dropping to zero since I want to get rid of mortgage as quick as I can.
- misiti3780 4y ago
  why do you want to pay off your mortgage so fast?
  - lnsru 4y ago
    I don’t like it. I don’t know future interest rate.
ohgodplsno 4y ago
In many countries, mortages cannot be over a certain fixed percentage of your income. In my case, in France, it is 33%. I currently pay over 40% of my income as rent. This has a double effect: * I'm paying for a landlord's mortgage, for a good that should be easily accessible, at insane prices. * I cannot save up that money, while my landlord does, allowing them to purchase more houses. Rent is theft.
iso1631 4y ago
It amuses me this recent panic in the US. The UK has had this housing problem for over 20 years. Reality in the UK is that if you can find the downpayment on a mortgage, the monthly outgoings in that mortgage (both the interest and the capital) are less than the rent. Sure you might have to replace a roof every 50-100 years (I had a quote in 2021 for my 60 year old roof for 4% of the value of the house), or a new heating system every 30 years (just replaced mine from the 80s, 3% of the cost of the house), but on the whole the vast majority of the cost is in that mortgage payment
oldstrangers 4y ago
Rental payments are higher than mortgages in most large cities. And those renters usually can't even qualify for a mortgage, despite paying more in rent.
- notyourday 4y ago
  There's a very simple solution to this problem: * any and every landlord immediately pays taxes based on the asking rent, no matter what rent it is. If a landlord is asking $2500/mo for something, the government immediately values the property based on whatever the formula is based off the asking rent, even if the landlord cannot fill the space.
  - anonymouskimmer 4y ago
    > any and every landlord immediately pays taxes based on the asking rent, no matter what rent it is. To work to decrease or cap rents this would have to be a dramatically increasing progressive tax. It would have to be a complicated progressive tax to work with both small, less desirable residences and mansions.
    - notyourday 4y ago
      No, because if they happened to own a small place they won't be able to rent it for a wishing price as there's a price pressure from above thus anyone with a smaller place will pay smaller taxes.
8note 4y ago
That rent will be 3K or higher. The competition is for who can pay the highest rent, and it won't be saved. Without a mortgage, eventually Joe Sixpack's full paycheck goes to rent
legohead 4y ago
That's definitely the case for my family. Every time we gain some extra money, it disappears. 5 years later however, our house has gained a ton of value, and we can upgrade to a better house with the same mortgage. And in my experience, the better house rises in value faster than our previous houses. My homes have gained far, far more value than I've ever added thru my own equity payments. Not that I'm promoting this system. The cost of housing and rent is so insane at the moment, I don't know what to do about my kids who are growing up fast...

by koolba 4y ago

lnsru 4y ago

Close to my numbers. My old rent plus monthly savings are close to monthly bank payment for my home. My real consumption is dropping to zero since I want to get rid of mortgage as quick as I can.

misiti3780 4y ago
why do you want to pay off your mortgage so fast?
- lnsru 4y ago
  I don’t like it. I don’t know future interest rate.

ohgodplsno 4y ago

In many countries, mortages cannot be over a certain fixed percentage of your income. In my case, in France, it is 33%. I currently pay over 40% of my income as rent. This has a double effect: * I'm paying for a landlord's mortgage, for a good that should be easily accessible, at insane prices. * I cannot save up that money, while my landlord does, allowing them to purchase more houses. Rent is theft.

iso1631 4y ago

It amuses me this recent panic in the US. The UK has had this housing problem for over 20 years. Reality in the UK is that if you can find the downpayment on a mortgage, the monthly outgoings in that mortgage (both the interest and the capital) are less than the rent. Sure you might have to replace a roof every 50-100 years (I had a quote in 2021 for my 60 year old roof for 4% of the value of the house), or a new heating system every 30 years (just replaced mine from the 80s, 3% of the cost of the house), but on the whole the vast majority of the cost is in that mortgage payment

oldstrangers 4y ago

Rental payments are higher than mortgages in most large cities. And those renters usually can't even qualify for a mortgage, despite paying more in rent.

notyourday 4y ago
There's a very simple solution to this problem: * any and every landlord immediately pays taxes based on the asking rent, no matter what rent it is. If a landlord is asking $2500/mo for something, the government immediately values the property based on whatever the formula is based off the asking rent, even if the landlord cannot fill the space.
- anonymouskimmer 4y ago
  > any and every landlord immediately pays taxes based on the asking rent, no matter what rent it is. To work to decrease or cap rents this would have to be a dramatically increasing progressive tax. It would have to be a complicated progressive tax to work with both small, less desirable residences and mansions.
  - notyourday 4y ago
    No, because if they happened to own a small place they won't be able to rent it for a wishing price as there's a price pressure from above thus anyone with a smaller place will pay smaller taxes.

8note 4y ago

That rent will be 3K or higher. The competition is for who can pay the highest rent, and it won't be saved. Without a mortgage, eventually Joe Sixpack's full paycheck goes to rent

legohead 4y ago

That's definitely the case for my family. Every time we gain some extra money, it disappears. 5 years later however, our house has gained a ton of value, and we can upgrade to a better house with the same mortgage. And in my experience, the better house rises in value faster than our previous houses. My homes have gained far, far more value than I've ever added thru my own equity payments. Not that I'm promoting this system. The cost of housing and rent is so insane at the moment, I don't know what to do about my kids who are growing up fast...