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I think the article still holds up. A financial crisis where you lose your job, a war causing deflation, a housing bubble bursting are all events that could lea

I think the article still holds up. A financial crisis where you lose your job, a war causing deflation, a housing bubble bursting are all events that could lead to you paying _much_ more than rent. If you can't pay, they'll take your house and everything else until they decide that the debt is paid. In case of a bubble bursting this can mean that you _still_ owe money after they took your house. This has happened to people. I also have a mortgage on my apartment and I also think it's a decent choice, especially considering that I'll have less income after retirement. But most people are only a couple of bad turns in life away of losing everything they own. All in all, I'd say the way to think this article presents does hold up to mortgage as well.

dmoy 2y ago
> and everything else Unless you live in a no-recourse state, where they can't take everything else. In AZ, CA, TX, WA, and a handful of other states, banks can't go after your other assets, just the house that's mortgaged.
- trogdor 2y ago
  Interesting. Do you know if mortgage rates in those states are higher, to compensate lenders for the increased risk?
  - dmoy 2y ago
    I think it matters a lot more for commercial mortgages. In any event, it's like 20-30bps or less according to the Fed. So higher, but not that much higher even for commercial mortgages, and even less for residential where there's a lot more federal protection going on. The bigger impact, I believe, is that housing prices can go more crazy. People will take more risk if they know they can walk and leave the bank holding the bag, so there isn't that limiting factor on prices. (Though I suspect, but obviously can't confirm, that the effect from non-recourse mortgage is absolutely dwarfed by other factors, especially out here on the west coast where we have very restrictive zoning policies, weaponized environmental policies inside urban areas, etc)
  - mikestew 2y ago
    WA resident: our mortgage is 2.5% from the credit union. I've not noticed that current rates are any worse than other states I've checked. OTOH, in 25 years of living here, I've never seen house prices go down, only stay steady.
    - jp191919 2y ago
      Home prices definitely went down during the great recession.
      - AstralStorm 2y ago
        So did the wages, and those went down more. If you lost a job during that time, you're pretty screwed.
- PopAlongKid 2y ago
  In CA, only the original mortgage used to buy your residence is non-recourse. If you refinance, the new mortgage is almost certainly recourse. There is also a similar process, non-judicial foreclosure[0], which is similar to non-recourse in some ways, but not for tax purposes (e.g. cancelation of debt income). [0]https://www.nolo.com/legal-encyclopedia/how-foreclosure-works-30066-2.html https://www.nolo.com/legal-encyclopedia/how-foreclosure-work...
phkahler 2y ago
>> If you can't pay, they'll take your house and everything else until they decide that the debt is paid. This is new. Mortgages in the US traditionally took just the home as collateral. Thanks for the reminder that this is now a thing to look out for, as I may need to borrow one more time than I ever expected.
- Nifty3929 2y ago
  I think it's actually the reverse. The house is the only collateral, but traditionally you would still owe the deficit if the collateral couldn't be sold to pay off the whole loan. This is what's changed in recent decades. A lot (most? all?) primary-residence home loans in the US are non-recourse, meaning that you aren't liable for the deficit - you only lose the house.
  - voisin 2y ago
    > A lot (most? all?) primary-residence home loans in the US are non-recourse, meaning that you aren't liable for the deficit - you only lose the house. This is wild. In Canada not only do we all take interest rate risk every 5 years maximum as we can’t lock in for longer (which seems to make our whole society less robust), we can’t refinance early if rates drop without massive penalties eliminating any incentive to do so, but all of our mortgages are full recourse. I can’t believe how much worse this seems, on a societal level, than the US.
    - anon7725 2y ago
      A couple of other good points vs Canada: most fixed-rate US mortgages don’t have a prepayment penalty, and many offer the option to “recast”, which means you can make a lump-sum payment and reamortize your loan while keeping the rate and end date the same. This has the effect of lowering your monthly payment and is often used as an alternative to refinancing if you’re buying and selling a home in sequence.
      - voisin 2y ago
        Thanks for this. I’d never heard of this option and once again I am shocked at how much better Americans have it than Canadians when it comes to mortgages.
WalterBright 2y ago
> they'll take your house Yes, and they'll sell the house to cover the debt. But the amount they receive from selling the house in excess of the debt goes to you. I.e. you'll get the equity portion. It's in your mortgage contract. Worth reading.
- olddustytrail 2y ago
  Yes but I think they're referring to negative equity.
- walkerbrown 2y ago
  No snark, but posting with genuine concern for any homebuyers who didn’t experience the pain of 2008, please read and grok this: https://www.investopedia.com/terms/u/underwater.asp https://www.investopedia.com/terms/u/underwater.asp
- AstralStorm 2y ago
  Unless you're backpaid enough so that they take equity in a penalty. And now you're homeless and with your equity you cannot acquire capital. Your credit is also tanked due to the default... Remember, most people do not own multiple houses and having no stable address can really mess you up legally even.
  - edmundsauto 2y ago
    What would be different in this situation if the person were renting? Usually costs are similar per month for comparable places. I guess the down payment is a difference? But if you’re that far in arrears on rent you’re really still bad off… I don’t feel convinced that having a mortgage debt is that much worse than not having one, if you lose your job and war and other bad things.
- tsimionescu 2y ago
  If your house is still worth enough to cover the debt. If the sale of your house is not enough to cover it (which can happen if you bought during a bubble that burst), will your whole debt at least be forgiven?
bluGill 2y ago
If there is a war you leave your house behind. If you rent you can save the difference in a foreign savings account. the point is there is alway risk and many different situations. depending on details there are different results.

dmoy 2y ago

> and everything else Unless you live in a no-recourse state, where they can't take everything else. In AZ, CA, TX, WA, and a handful of other states, banks can't go after your other assets, just the house that's mortgaged.

trogdor 2y ago
Interesting. Do you know if mortgage rates in those states are higher, to compensate lenders for the increased risk?
- dmoy 2y ago
  I think it matters a lot more for commercial mortgages. In any event, it's like 20-30bps or less according to the Fed. So higher, but not that much higher even for commercial mortgages, and even less for residential where there's a lot more federal protection going on. The bigger impact, I believe, is that housing prices can go more crazy. People will take more risk if they know they can walk and leave the bank holding the bag, so there isn't that limiting factor on prices. (Though I suspect, but obviously can't confirm, that the effect from non-recourse mortgage is absolutely dwarfed by other factors, especially out here on the west coast where we have very restrictive zoning policies, weaponized environmental policies inside urban areas, etc)
- mikestew 2y ago
  WA resident: our mortgage is 2.5% from the credit union. I've not noticed that current rates are any worse than other states I've checked. OTOH, in 25 years of living here, I've never seen house prices go down, only stay steady.
  - jp191919 2y ago
    Home prices definitely went down during the great recession.
    - AstralStorm 2y ago
      So did the wages, and those went down more. If you lost a job during that time, you're pretty screwed.
PopAlongKid 2y ago
In CA, only the original mortgage used to buy your residence is non-recourse. If you refinance, the new mortgage is almost certainly recourse. There is also a similar process, non-judicial foreclosure[0], which is similar to non-recourse in some ways, but not for tax purposes (e.g. cancelation of debt income). [0]https://www.nolo.com/legal-encyclopedia/how-foreclosure-works-30066-2.html https://www.nolo.com/legal-encyclopedia/how-foreclosure-work...

phkahler 2y ago

>> If you can't pay, they'll take your house and everything else until they decide that the debt is paid. This is new. Mortgages in the US traditionally took just the home as collateral. Thanks for the reminder that this is now a thing to look out for, as I may need to borrow one more time than I ever expected.

Nifty3929 2y ago
I think it's actually the reverse. The house is the only collateral, but traditionally you would still owe the deficit if the collateral couldn't be sold to pay off the whole loan. This is what's changed in recent decades. A lot (most? all?) primary-residence home loans in the US are non-recourse, meaning that you aren't liable for the deficit - you only lose the house.
- voisin 2y ago
  > A lot (most? all?) primary-residence home loans in the US are non-recourse, meaning that you aren't liable for the deficit - you only lose the house. This is wild. In Canada not only do we all take interest rate risk every 5 years maximum as we can’t lock in for longer (which seems to make our whole society less robust), we can’t refinance early if rates drop without massive penalties eliminating any incentive to do so, but all of our mortgages are full recourse. I can’t believe how much worse this seems, on a societal level, than the US.
  - anon7725 2y ago
    A couple of other good points vs Canada: most fixed-rate US mortgages don’t have a prepayment penalty, and many offer the option to “recast”, which means you can make a lump-sum payment and reamortize your loan while keeping the rate and end date the same. This has the effect of lowering your monthly payment and is often used as an alternative to refinancing if you’re buying and selling a home in sequence.
    - voisin 2y ago
      Thanks for this. I’d never heard of this option and once again I am shocked at how much better Americans have it than Canadians when it comes to mortgages.

WalterBright 2y ago

> they'll take your house Yes, and they'll sell the house to cover the debt. But the amount they receive from selling the house in excess of the debt goes to you. I.e. you'll get the equity portion. It's in your mortgage contract. Worth reading.

olddustytrail 2y ago
Yes but I think they're referring to negative equity.
walkerbrown 2y ago
No snark, but posting with genuine concern for any homebuyers who didn’t experience the pain of 2008, please read and grok this: https://www.investopedia.com/terms/u/underwater.asp https://www.investopedia.com/terms/u/underwater.asp
AstralStorm 2y ago
Unless you're backpaid enough so that they take equity in a penalty. And now you're homeless and with your equity you cannot acquire capital. Your credit is also tanked due to the default... Remember, most people do not own multiple houses and having no stable address can really mess you up legally even.
- edmundsauto 2y ago
  What would be different in this situation if the person were renting? Usually costs are similar per month for comparable places. I guess the down payment is a difference? But if you’re that far in arrears on rent you’re really still bad off… I don’t feel convinced that having a mortgage debt is that much worse than not having one, if you lose your job and war and other bad things.
tsimionescu 2y ago
If your house is still worth enough to cover the debt. If the sale of your house is not enough to cover it (which can happen if you bought during a bubble that burst), will your whole debt at least be forgiven?

bluGill 2y ago

If there is a war you leave your house behind. If you rent you can save the difference in a foreign savings account. the point is there is alway risk and many different situations. depending on details there are different results.