4 ms·

And here at the bottom of the see, there is no down payment (financing up to 100%), but young renters still can't get the a mortage of the same monthly amount a

And here at the bottom of the see, there is no down payment (financing up to 100%), but young renters still can't get the a mortage of the same monthly amount as they pay rent, because of regulatory reasons -- mortage ceiling is defined as something like 5x gross yearly salary. Somehow it's fine to pay half the salary in rent, but not fine if it's financing the mortage.

jedberg 4y ago
That sort of makes sense. When you own a property, you have to maintain it and pay property taxes. When you add all that up, you either need a lot more than rent, or you need the mortgage to be lower than rent so you can afford those other expenses.
- BobbyJo 4y ago
  100%. If it's an older house, the mortgage might not even be half your costs for the first few years, while you get everything that breaks back in good condition.
- mxkdodi 4y ago
  It makes absolute sense, because maintenance costs are non-negligible. I just paid a fifteen thousand dollar plumbing bill. Since rent would include the ability to call the landlord to make him fix that, I sure would expect rent to be higher for the same place than my mortgage is. Last year I spent twenty grand on a new roof. What's next? Idk, but that's why my mortgage isn't half of my salary. If it was rent, these things wouldn't be my problem. That's the trade-off.
  - ghaff 4y ago
    Depending on what you include I figure property taxes, insurance, ongoing maintenance of my house and property are a good $1K/month (obviously with a fair bit of lumpiness for large projects). Some things you can postpone and some things you can trade money for your time & effort but it's still a non-trivial amount.
    - sokoloff 4y ago
      I'd love if all that was $1K/mo total. My property taxes alone are $1001/mo (for 2021; they went up a little bit last year, but I could quickly look up 2021 online).
      - ghaff 4y ago
        Property taxes vary a lot. Mine are about $350/month. $1K/month is probably low for me though if I added up all the expenses a renter wouldn't generally have although a renter also probably wouldn't be renting a house like mine for an extended period so it's a bit hard to do apples to apples. In any case, living in a house is very much not free even once you're paid off the mortgage--especially if you make an effort to prevent a lot of maintenance debt from accumulating.
  - carlosjobim 4y ago
    > I just paid a fifteen thousand dollar plumbing bill. That has to be for commercial real estate, or you've been ripped off. There is no possibility of a single family dwelling ever having plumbing problems of that scale. But maintenance costs are in general a landlord lie. They wouldn't rent out their properties if costs where anywhere near income. As for my own anecdote, my landlord has spent at most 0,5% of what he's gotten in rent from me on maintenance over the years. A normal tenant won't break anything or induce any maintenance costs.
    - gangstead 4y ago
      That is a very believable number. I had a leak in my concrete slab last year. The plumbing bill was $20k, which didn't include fixing all the holes in the drywall nor the bathroom remodel after they went through the shower to jackhammer a hole in the foundation.
- DanTheManPR 4y ago
  But it's not as though property taxes and ongoing maintenance costs don't exist for apartments. The income the owner receives from the rents has to cover all of that.
  - jedberg 4y ago
    Exactly. That's why if your mortgage == rent then you're behind. Because rent already includes those things.
  - RHSeeger 4y ago
    Well, yes and no. If you own and the roof needs replacing, you need to have that money on hand (or be able to take out another loan to cover it, which isn't always possible). If you rent, you don't.
    - 8note 4y ago
      Well, if you rent, you rely on the landlord to be able to do that, and if they can't, you're still screwed
      - RHSeeger 4y ago
        I don't see how that's important to the discussion at all. Sure, if you live somewhere, a problem with the roof is "your problem". But if you own, it's also "your responsibility" vs renting where it's "their responsibility". And the person whose responsibility it is is the one that is saddled with the need to acquire that lump sum of money to deal with it.
  - RhysU 4y ago
    How much does being able to call an expense an expense figure into things? Like, why wouldn't I set up a company owns my house and rents it back to me?
- notahacker 4y ago
  Also, it's a little easier to just scrape by for 12 months of a rental contract than for a couple of decades of a mortgage, and a lot more difficult to repossess a house. And I think we all saw why banks should be expected to be a lot more cautious in rating homebuyers' ability to pay than some individual landlords might be about their tenants in 2008
- wankle 4y ago
  Our home was $200K. If we own it for 30 years, the property taxes will average to about $180K over that time. If we have $70K expenses (roof, HVAC, etc.) then the total would be 250K. If we sell our home at the end of 30 years for exactly what we bought it for, no raise in value at all, 200K, then 250K of maintenance works out to around $700 per month for each month of those 30 years. Any amount we can sell the house for over the original $200K price, reduces the taxes and maintenance down from $700 potentially to zero. If we sell at the end of 30 years for $450K, even accounting for taxes and maintenance, we lived rent free for 30 years.
  - jedberg 4y ago
    You're confusing assets and cashflow. Yes, after 30 years, you came out ahead. But also, you can't sell your house when the drain breaks and you need $10,000 today to pay for fixing it. Especially if you just bought the house. Also, you forgot to account for the $180K in mortgage interest.
    - Spooky23 4y ago
      Don’t forgot that rent goes up. Renters pay taxes too. My apartment that was $900/month in 2001 is $2200 today. Outside of some of the really stupid markets, it’s almost always better to own. You’ll be fixing that drain every year.
    - wankle 4y ago
      I'll throw in the 180K mortgage interest and the mortgage insurance which I also forgot and wager I still come out ahead. Rent would be somewhere between $750K to $1M over that time and none of it is returned. Since we control our mortgage, we paid it off early, at around 15-16 year mark (due to my wife making me realize the importance of it). We live rent and mortgage free the rest of our lives thank God. I only wish I'd kept either of our 2 former houses instead of taking better job offers requiring moving ultimately to the bay area where we couldn't afford to buy a home. Texas is nice though! My Dad always said, buy a house as soon as you can.
      - 4y ago
- kortilla 4y ago
  Property taxes are usually collected as part of the mortgage payment for just that reason. The bank doesn’t want another lien risk lurking there.
- eloisant 4y ago
  Also if your revenue drop, it's easier to move as a tenant than to sell your house.
loeg 4y ago
> mortage ceiling is defined as something like 5x gross yearly salary. No -- mortgages are limited to 50% debt-to-income. The exact principal that relates to income depends on prevailing interest rates. You can see this fairly easily by using any mortgage calculator, e.g., Google's (in the "Purchase budget" tab). Keeping fixed: $100k household income, 0% down, California, Google's tax and fees estimates, 800+ credit score (just to eliminate that as a factor). At 2% interest, Google thinks you can get a $512k (~5.1x income) mortgage (at 50% DTI). At 6% interest, that falls to $368k (~3.7x income). At 10%, $274k. You get the idea. (For all of these loans, your annual payments would be about $50k/year.)
- weard_beard 4y ago
  Bought a house in 2019. Downpayment and Credit Score will make a huge difference. This seems accurate to my experience though. At 5% down, $170k household income. 740 credit score. (Credit Score bumped us from a 2.5% interest rate to 3) The bank said we could afford $680k max.
dragonwriter 4y ago
> Somehow it's fine to pay half the salary in rent, but not fine if it's financing the mortage. Because eviction is easier than foreclosure (and, actually, a lot of big property management companies look at similar affordability criteria as lending banks, but you can find mom & pop landlords; mom & pop mortgage lenders, unless they are literally rich family members making an informal loan, probably not.)
oldgradstudent 4y ago
> Somehow it's fine to pay half the salary in rent, but not fine if it's financing the mortage. 50% of income as mortgage payments are extremely risky mortgages. We've just had the entire financial system collapse not so long ago because of such shenanigans. Don't people remember the 2008 mortgage crisis? If you can't pay the rent, you rent something cheaper. It is not nearly that easy when you have a mortgage.
pandaman 4y ago
>Somehow it's fine to pay half the salary in rent, but not fine if it's financing the mortage. Where is it fine to rent for half of the salary? Last time I rented a couple years ago, the corporate landlord wanted to see either a paystub exceeding 4x rent for the same period or a bank statement for the funds exceeding 3x total rent. This varies, of course, but the standard used to be the 40x rule (rent not exceeding 30% of income before tax).

jedberg 4y ago

That sort of makes sense. When you own a property, you have to maintain it and pay property taxes. When you add all that up, you either need a lot more than rent, or you need the mortgage to be lower than rent so you can afford those other expenses.

BobbyJo 4y ago
100%. If it's an older house, the mortgage might not even be half your costs for the first few years, while you get everything that breaks back in good condition.
mxkdodi 4y ago
It makes absolute sense, because maintenance costs are non-negligible. I just paid a fifteen thousand dollar plumbing bill. Since rent would include the ability to call the landlord to make him fix that, I sure would expect rent to be higher for the same place than my mortgage is. Last year I spent twenty grand on a new roof. What's next? Idk, but that's why my mortgage isn't half of my salary. If it was rent, these things wouldn't be my problem. That's the trade-off.
- ghaff 4y ago
  Depending on what you include I figure property taxes, insurance, ongoing maintenance of my house and property are a good $1K/month (obviously with a fair bit of lumpiness for large projects). Some things you can postpone and some things you can trade money for your time & effort but it's still a non-trivial amount.
  - sokoloff 4y ago
    I'd love if all that was $1K/mo total. My property taxes alone are $1001/mo (for 2021; they went up a little bit last year, but I could quickly look up 2021 online).
    - ghaff 4y ago
      Property taxes vary a lot. Mine are about $350/month. $1K/month is probably low for me though if I added up all the expenses a renter wouldn't generally have although a renter also probably wouldn't be renting a house like mine for an extended period so it's a bit hard to do apples to apples. In any case, living in a house is very much not free even once you're paid off the mortgage--especially if you make an effort to prevent a lot of maintenance debt from accumulating.
- carlosjobim 4y ago
  > I just paid a fifteen thousand dollar plumbing bill. That has to be for commercial real estate, or you've been ripped off. There is no possibility of a single family dwelling ever having plumbing problems of that scale. But maintenance costs are in general a landlord lie. They wouldn't rent out their properties if costs where anywhere near income. As for my own anecdote, my landlord has spent at most 0,5% of what he's gotten in rent from me on maintenance over the years. A normal tenant won't break anything or induce any maintenance costs.
  - gangstead 4y ago
    That is a very believable number. I had a leak in my concrete slab last year. The plumbing bill was $20k, which didn't include fixing all the holes in the drywall nor the bathroom remodel after they went through the shower to jackhammer a hole in the foundation.
DanTheManPR 4y ago
But it's not as though property taxes and ongoing maintenance costs don't exist for apartments. The income the owner receives from the rents has to cover all of that.
- jedberg 4y ago
  Exactly. That's why if your mortgage == rent then you're behind. Because rent already includes those things.
- RHSeeger 4y ago
  Well, yes and no. If you own and the roof needs replacing, you need to have that money on hand (or be able to take out another loan to cover it, which isn't always possible). If you rent, you don't.
  - 8note 4y ago
    Well, if you rent, you rely on the landlord to be able to do that, and if they can't, you're still screwed
    - RHSeeger 4y ago
      I don't see how that's important to the discussion at all. Sure, if you live somewhere, a problem with the roof is "your problem". But if you own, it's also "your responsibility" vs renting where it's "their responsibility". And the person whose responsibility it is is the one that is saddled with the need to acquire that lump sum of money to deal with it.
- RhysU 4y ago
  How much does being able to call an expense an expense figure into things? Like, why wouldn't I set up a company owns my house and rents it back to me?
notahacker 4y ago
Also, it's a little easier to just scrape by for 12 months of a rental contract than for a couple of decades of a mortgage, and a lot more difficult to repossess a house. And I think we all saw why banks should be expected to be a lot more cautious in rating homebuyers' ability to pay than some individual landlords might be about their tenants in 2008
wankle 4y ago
Our home was $200K. If we own it for 30 years, the property taxes will average to about $180K over that time. If we have $70K expenses (roof, HVAC, etc.) then the total would be 250K. If we sell our home at the end of 30 years for exactly what we bought it for, no raise in value at all, 200K, then 250K of maintenance works out to around $700 per month for each month of those 30 years. Any amount we can sell the house for over the original $200K price, reduces the taxes and maintenance down from $700 potentially to zero. If we sell at the end of 30 years for $450K, even accounting for taxes and maintenance, we lived rent free for 30 years.
- jedberg 4y ago
  You're confusing assets and cashflow. Yes, after 30 years, you came out ahead. But also, you can't sell your house when the drain breaks and you need $10,000 today to pay for fixing it. Especially if you just bought the house. Also, you forgot to account for the $180K in mortgage interest.
  - Spooky23 4y ago
    Don’t forgot that rent goes up. Renters pay taxes too. My apartment that was $900/month in 2001 is $2200 today. Outside of some of the really stupid markets, it’s almost always better to own. You’ll be fixing that drain every year.
  - wankle 4y ago
    I'll throw in the 180K mortgage interest and the mortgage insurance which I also forgot and wager I still come out ahead. Rent would be somewhere between $750K to $1M over that time and none of it is returned. Since we control our mortgage, we paid it off early, at around 15-16 year mark (due to my wife making me realize the importance of it). We live rent and mortgage free the rest of our lives thank God. I only wish I'd kept either of our 2 former houses instead of taking better job offers requiring moving ultimately to the bay area where we couldn't afford to buy a home. Texas is nice though! My Dad always said, buy a house as soon as you can.
    - 4y ago
kortilla 4y ago
Property taxes are usually collected as part of the mortgage payment for just that reason. The bank doesn’t want another lien risk lurking there.
eloisant 4y ago
Also if your revenue drop, it's easier to move as a tenant than to sell your house.

loeg 4y ago

> mortage ceiling is defined as something like 5x gross yearly salary. No -- mortgages are limited to 50% debt-to-income. The exact principal that relates to income depends on prevailing interest rates. You can see this fairly easily by using any mortgage calculator, e.g., Google's (in the "Purchase budget" tab). Keeping fixed: $100k household income, 0% down, California, Google's tax and fees estimates, 800+ credit score (just to eliminate that as a factor). At 2% interest, Google thinks you can get a $512k (~5.1x income) mortgage (at 50% DTI). At 6% interest, that falls to $368k (~3.7x income). At 10%, $274k. You get the idea. (For all of these loans, your annual payments would be about $50k/year.)

weard_beard 4y ago
Bought a house in 2019. Downpayment and Credit Score will make a huge difference. This seems accurate to my experience though. At 5% down, $170k household income. 740 credit score. (Credit Score bumped us from a 2.5% interest rate to 3) The bank said we could afford $680k max.

dragonwriter 4y ago

> Somehow it's fine to pay half the salary in rent, but not fine if it's financing the mortage. Because eviction is easier than foreclosure (and, actually, a lot of big property management companies look at similar affordability criteria as lending banks, but you can find mom & pop landlords; mom & pop mortgage lenders, unless they are literally rich family members making an informal loan, probably not.)

oldgradstudent 4y ago

> Somehow it's fine to pay half the salary in rent, but not fine if it's financing the mortage. 50% of income as mortgage payments are extremely risky mortgages. We've just had the entire financial system collapse not so long ago because of such shenanigans. Don't people remember the 2008 mortgage crisis? If you can't pay the rent, you rent something cheaper. It is not nearly that easy when you have a mortgage.

pandaman 4y ago

>Somehow it's fine to pay half the salary in rent, but not fine if it's financing the mortage. Where is it fine to rent for half of the salary? Last time I rented a couple years ago, the corporate landlord wanted to see either a paystub exceeding 4x rent for the same period or a bank statement for the funds exceeding 3x total rent. This varies, of course, but the standard used to be the 40x rule (rent not exceeding 30% of income before tax).