8 ms·

I have a paid off house and zero debt. Sure I might be ahead if I had used some of the cash to buy stocks instead of paying down the house early, but I’m comple

I have a paid off house and zero debt. Sure I might be ahead if I had used some of the cash to buy stocks instead of paying down the house early, but I’m completely happy with my decision. There is no peace of mind like not owing anyone a cent and keeping your living expenses low. Having debt was incredibly stressful and no longer worrying about making payments is the best thing that’s ever happened to my mental health.

dheera 2y ago
I never understood buying things that I can't afford. I always thought you earn money and when you earn enough money to buy something you can buy that something. That is always how I have lived life. For that reason I also find it ridiculous that it's the social norm to take debt to buy a roof to put over your head. A (simple, clean, functional) house is a basic need, not a luxury item. I always assumed that if I don't have the cash for a house, I can't afford a house. In those terms, I can't afford a house right now, so I've been renting the whole time. I think it should be the social norm for the median income to be able to buy a house with cash. For that to happen either people need to be making $1M/year median, or house prices need to come down to 1/5 of what they are.
- sokoloff 2y ago
  It's fine to expect some people to buy a house with cash. I don't think that precludes saving for many years to do so (meaning the median income doesn't need to be $1M/yr).
  - dheera 2y ago
    Unfortunately housing prices are rising so fast that saving for years doesn't necessarily get you there, unless median income is close to ~1M by my back-of-envelope calculations, which include: - taxes (1M is close to 500K after taxes) - money that you need to cut out and put into retirement to sustain yourself from age 65-100 - living expenses and rent until you buy - real estate prices rising the whole time
    - sokoloff 2y ago
      > living expenses and rent until you buy Which will of course be stratospheric in a world where median labor costs $500 per hour.
    - prawn 2y ago
      Which is why taking on debt to buy property is often a good option - you lock in prices, then they rise. Where I live, house prices double in value every ten years, quite reliably. Recently, it's been faster. In ten years, you're paying rent on a $2m property while someone else is paying down a $500-800k loan (using your example figure).
    - steelframe 2y ago
      > sustain yourself from age 65-100 Fortunately my life expectancy has dropped in the past few years!
    - throwaway2037 2y ago
      > Unfortunately housing prices are rising so fast that saving for years doesn't necessarily get you there Where? In many, many highly developed countries this isn't true. > 1M is close to 500K after taxes Woah. Where do you live where effective income tax rates are 50% for 1M+? Please don't confuse marginal ("headline") vs effective ("actual") tax rates.
      - ehmmmmmmmm 2y ago
        In San Francisco if you make $1M as a W-2 employee your marginal tax rate is ~53% and your effective tax rate is ~47%. If you make $1M on your own the rates are even higher. (That's not including the 10% sales tax you pay on almost everything you buy with the money you have left, property taxes on property you thought you owned, property taxes landlords financially pass onto you as a renter, etc.)
        seanmcdirmid 2y ago
        Property taxes are the only thing in California that are pretty mellow given prop 13. Well, unless the property was just turned over.
- booleandilemma 2y ago
  I'm in the same spot. I'm in the middle class, I've been renting for years, and I refuse to go into debt by taking out a loan for a house. This is a societal failure.
  - prawn 2y ago
    A mortgage as a tool is available to you. If you refuse to go into debt, is that societal failure? Affordability of housing is a serious issue, but I'm not sure expecting to buy property without debt is necessarily so. It seems like a self-defeating position to take?
  - jjav 2y ago
    > I refuse to go into debt by taking out a loan for a house But you are renting. While renting isn't debt, it can be helpful to think of it as debt you have to pay every month (unless you plan to be homeless). So you have 12N (where N is the number of years you think you might still live) of rent debt payments that you are committed to pay. If you transform that into mortgage payments, at least you're building equity. And it will only be 1230 payments (given a 30 year mortgage) so it is a bounded number unlike 12*N.
    - dheera 2y ago
      Not really, you can get out of paying rent easily, usually the maximum penalty is one extra month of rent, which won't break most middle class people. It's not that simple to sell a house, and if real estate prices crash you're still on the hook for the several hundred thousand dollar difference.
      - jjav 2y ago
        > Not really, you can get out of paying rent easily And then, what? Unless you have a backup plan which allows you to live for free somewhere, you can't get out of paying someone for it. Whether rent or a mortgage. For housing, it is most useful to plan long term and consider you have a lifetime of housing payments coming up. How can you minimize that lifetime total?
- rcxdude 2y ago
  It's more typical to think of 'affording' in terms of your expected lifetime income, and this is generally a good predictor of people's spending habits. Lending generally enables this. Avoiding debt entirely is a very risk-averse strategy. As ridiculous as house prices are, they are still generally affordable for many (and whether renting or buying is a better overall financial decision is dependent on many factors which depend on your location, how long you expect to own the house, and your risk profile for real estate vs any other kind of investment. Factors like rental rights can also factor pretty heavily).
  - dheera 2y ago
    Why is avoiding debt a risk averse strategy? I actually do a lot of high risk investments with a small percentage of my net worth -- bitcoin, options, you name it. But I do it with hard cash to my name. If I lose a chunk of that I don't owe anyone anything. I just never thought spending someone else's money and then owing them was even anywhere close to my moral radar of things I would do. The only one time I took a debt is for a car when I had the cash to buy it but it was 2022 and I took a loan at 2% and put the balance of the car in treasury and municipal bonds at ~5% and paying back the loan slowly while selling off the bonds. I wouldn't take a loan if I didn't have the money. Before I could afford a car I just rented cars.
    - rcxdude 2y ago
      because the risk with debt is not being able to pay it back - and you are paying the lender for their side of that risk (generally paying less the more of that risk falls on your side, like secured debt). It's a service they are freely offering (and in fact benefits them disproportionately on average), I don't see how it's a moral issue at all.
      - dheera 2y ago
        The moral issue I have is that simply put, if I don't have the money for something, I wasn't meant to have that something. I need to earn the money for it, after which I deserve to have that something. However, the most basic clean-and-functional versions of basic necessities (food, water, shelter, and transportation) should be accessible to everyone working a full-time job, in my opinion, without having to spend other peoples' money. 3 out of those 4 are attainable even with a low-paying job, it's really just shelter that is the problem.
- Dylan16807 2y ago
  I agree that house prices should come down. But given that you need a home, what's the difference between $1000 in rent+fees and $1000 in mortgage+taxes+fees? Normally the biggest difference between renting and buying with debt is that you can stop renting. But you're not going to stop having a home.
  - synergy20 2y ago
    my landlord friend told me, many of her tenants earn decent salary, definitely more than her income, they can even spend $8000 or more to remodel a car or things like that, but can never save up to the 20% down payment ever.
    - bmicraft 2y ago
      > spend $8000 or more to remodel a car > can never save up to the 20% down payment something tells me those two things are connected
      - brailsafe 2y ago
        Well, at that rate, one could not remodel 15 cars and maybe have enough for the down payment on a studio in some markets. Or one could remodel a car and give up on home ownership, because it seems like a losing idea atm, and they'll have pursued something they find fruitful for the time being. At least they'll have the car in common with their boomer neighbors.
    - deleted 2y ago
      [deleted]
    - throwaway2037 2y ago
      > remodel a car What does this mean?
      - chasd00 2y ago
        Restore a classic or like high performance (or other) customizations.
- jjcm 2y ago
  > I never understood buying things that I can't afford. I think even if you choose not to use debt as a mechanism, you should understand why it's used as a mechanism, much like the parent comment has. Debt as a mechanism is not a bad thing - there's ample proof out there that availability of credit is an extremely strong indicator of future economic activity at the macro level.
- zharknado 2y ago
  I think halal mortgages are instructive on this point. To be clear, I’m not Muslim nor a lending expert, I just think it’s a really interesting setup. As I understand it, sharia law forbids paying interest, so a conventional mortgage is not an option for adherents. However, several different mechanisms are allowed by which the purchaser gradually gains full ownership of the home. E.g. one is roughly equivalent to a rent-to-own agreement. The financier still gains a profit that reflects the risk their upfront investment is subject to. What I find interesting is a recognition that some people need a lot of time to attain homeownership, and it may be valuable to let them live in the home before they fully achieve it, despite the outright rejection of lending as the mechanism.
  - dheera 2y ago
    Well damn, can I just take out $10M in personal loans, tell them my religion doesn't believe in paying interest, buy Treasury bonds with it, and live off the interest?
    - dtx1 2y ago
      If you find someone who lends you 10M interest free sure
- t0bia_s 2y ago
  I agree. I think current economical "norm" of having debt is made for purpose by states and banks. Because when you have debt, you will be more obedient citizen, always voting in favor of system that gives "benefits" of using money that you don't own. With price of loosing our freedom with every new regulations.
- jjav 2y ago
  > I never understood buying things that I can't afford. For most things, that's a wise philosophy. Going into debt for something that depreciates like cars or furniture or electronics, is not wise. Housing is different though for several reasons. One is that you must live somewhere. So (unless being homeless in an option) you have to pay for housing one way or the other. So you either buy (build equity) or rent (a pure expense). Another reason is that a house may (often does) appreciate in value so you're leveraging that debt to make money. Even if it depreciates, it hardly ever depreciates faster than paying rent. Another reason is that rents always go up, a mortgage locks in your cost for the next 30 years.
- GuB-42 2y ago
  You can think of a mortgage like renting a house from your bank. Or a bit more precisely, for the time the mortgage is running, you and the bank are essentially co-owners, and you rent the share you don't own from the bank (that would be the interests) while at the same time, you buy the bank share bit by bit (that would be the principal). At the end, you become a full owner and stop paying "rent" to the bank.
beryilma 2y ago
Owning a house does not mean not owing anyone a cent. You still owe multiple types of taxes to the government. You still need to get insurance. You still need to make repairs. I actually find piece of mind in renting. I can always say screw it and move to the cheapest part of the country as I am getting closer to retirement age.
- rnewme 2y ago
  Selling that house before moving to the country side is surely amount to something
- geraldwhen 2y ago
  You can buy better neighbors with a house, and less crime.
  - gwbas1c 2y ago
    > You can buy better neighbors with a house, and less crime. I wish! I built a fancy house in a fancy neighborhood, and then a real a-hole bought the house next to me as his retirement home.
    - bddgyrdfv 2y ago
      I feel this. Unfortunately the only surefire way to avoid this situation is to be the bigger asshole.
      - chihuahua 2y ago
        Not the only way. You can do what Bill Gates did, and buy all the surrounding properties. In his case, some of his staff live there.
        r00fus 2y ago
        Billionaires do this - Zuckerberg did the same.
lr4444lr 2y ago
To each his own, but I get more peace of mind with a larger retirement account due to the low fixed rates we had in the US from 2009 to around 2022. I can't liquidate my house piecemeal when I need money like I can my brokerage assets.
- VelesDude 2y ago
  This is one of those areas the Australian government has done ok in. Mandatory superannuation retirement funds. 11% (?) of all pay goes into this fund to be invested. Thus you can pay off the house and have an investment fund at the same time. You can withdraw from your fund if you have a hardship but it is generally considered best to not touch it.
  - silverquiet 2y ago
    I have a house and a brokerage account that’s worth a few times my what my house is (it’s rather modest). Nothing is stopping an American from doing both other than their own priorities (and I’ve neglected areas that other people find important - I rarely travel and drive a beater car for instance; to each their own).
    - VelesDude 2y ago
      Pretty much. While it is mandated here, there is nothing stopping others form doing the same. On my end it is just a manner of optics. The money being put aside, I never see week to week thus it just seems like an added bonus even though it is really just a part of the pay cycle.
      - silverquiet 2y ago
        We have private tax-advantaged plans that work essentially like that, but they are totally optional. Interestingly the only system that is mandatory is our “Social Security” - you are obligated to pay in but the money is pooled; you get something akin to shares in the system, but it only entitles you to a specific payout after a certain age; your contributions are not privately owned. Unusually for these types of discussions, it seems like the US system is more socialized than the alternative in your country.
slyall 2y ago
A house is not a zero-risk investment. Any number of reasons from Natural disaster on down could cause it to lose much of it's value or even become uninhabitable. Possibly in a way that insurance wouldn't cover. Think of people who owned houses in declining industrial cities. The local economy went bad, their house value went down and they faced a barrier to moving since they couldn't sell, move, and get a comparable house in a city with better prospects.
- dusted 2y ago
  it's still not a high risk, owning a house (that is, having paid for it, not owing any money to the bank) still leaves you in a better position than a renter, as you can basically let it burn and will still be in an easier position to get a loan for a new house in another place if you really need to
  - slyall 2y ago
    So you are saying somebody with $500k of investments is worse off than somebody whose house just went from $500k to to $200k ?

dheera 2y ago

I never understood buying things that I can't afford. I always thought you earn money and when you earn enough money to buy something you can buy that something. That is always how I have lived life. For that reason I also find it ridiculous that it's the social norm to take debt to buy a roof to put over your head. A (simple, clean, functional) house is a basic need, not a luxury item. I always assumed that if I don't have the cash for a house, I can't afford a house. In those terms, I can't afford a house right now, so I've been renting the whole time. I think it should be the social norm for the median income to be able to buy a house with cash. For that to happen either people need to be making $1M/year median, or house prices need to come down to 1/5 of what they are.

sokoloff 2y ago
It's fine to expect some people to buy a house with cash. I don't think that precludes saving for many years to do so (meaning the median income doesn't need to be $1M/yr).
- dheera 2y ago
  Unfortunately housing prices are rising so fast that saving for years doesn't necessarily get you there, unless median income is close to ~1M by my back-of-envelope calculations, which include: - taxes (1M is close to 500K after taxes) - money that you need to cut out and put into retirement to sustain yourself from age 65-100 - living expenses and rent until you buy - real estate prices rising the whole time
  - sokoloff 2y ago
    > living expenses and rent until you buy Which will of course be stratospheric in a world where median labor costs $500 per hour.
  - prawn 2y ago
    Which is why taking on debt to buy property is often a good option - you lock in prices, then they rise. Where I live, house prices double in value every ten years, quite reliably. Recently, it's been faster. In ten years, you're paying rent on a $2m property while someone else is paying down a $500-800k loan (using your example figure).
  - steelframe 2y ago
    > sustain yourself from age 65-100 Fortunately my life expectancy has dropped in the past few years!
  - throwaway2037 2y ago
    > Unfortunately housing prices are rising so fast that saving for years doesn't necessarily get you there Where? In many, many highly developed countries this isn't true. > 1M is close to 500K after taxes Woah. Where do you live where effective income tax rates are 50% for 1M+? Please don't confuse marginal ("headline") vs effective ("actual") tax rates.
    - ehmmmmmmmm 2y ago
      In San Francisco if you make $1M as a W-2 employee your marginal tax rate is ~53% and your effective tax rate is ~47%. If you make $1M on your own the rates are even higher. (That's not including the 10% sales tax you pay on almost everything you buy with the money you have left, property taxes on property you thought you owned, property taxes landlords financially pass onto you as a renter, etc.)
      - seanmcdirmid 2y ago
        Property taxes are the only thing in California that are pretty mellow given prop 13. Well, unless the property was just turned over.
booleandilemma 2y ago
I'm in the same spot. I'm in the middle class, I've been renting for years, and I refuse to go into debt by taking out a loan for a house. This is a societal failure.
- prawn 2y ago
  A mortgage as a tool is available to you. If you refuse to go into debt, is that societal failure? Affordability of housing is a serious issue, but I'm not sure expecting to buy property without debt is necessarily so. It seems like a self-defeating position to take?
- jjav 2y ago
  > I refuse to go into debt by taking out a loan for a house But you are renting. While renting isn't debt, it can be helpful to think of it as debt you have to pay every month (unless you plan to be homeless). So you have 12N (where N is the number of years you think you might still live) of rent debt payments that you are committed to pay. If you transform that into mortgage payments, at least you're building equity. And it will only be 1230 payments (given a 30 year mortgage) so it is a bounded number unlike 12*N.
  - dheera 2y ago
    Not really, you can get out of paying rent easily, usually the maximum penalty is one extra month of rent, which won't break most middle class people. It's not that simple to sell a house, and if real estate prices crash you're still on the hook for the several hundred thousand dollar difference.
    - jjav 2y ago
      > Not really, you can get out of paying rent easily And then, what? Unless you have a backup plan which allows you to live for free somewhere, you can't get out of paying someone for it. Whether rent or a mortgage. For housing, it is most useful to plan long term and consider you have a lifetime of housing payments coming up. How can you minimize that lifetime total?
rcxdude 2y ago
It's more typical to think of 'affording' in terms of your expected lifetime income, and this is generally a good predictor of people's spending habits. Lending generally enables this. Avoiding debt entirely is a very risk-averse strategy. As ridiculous as house prices are, they are still generally affordable for many (and whether renting or buying is a better overall financial decision is dependent on many factors which depend on your location, how long you expect to own the house, and your risk profile for real estate vs any other kind of investment. Factors like rental rights can also factor pretty heavily).
- dheera 2y ago
  Why is avoiding debt a risk averse strategy? I actually do a lot of high risk investments with a small percentage of my net worth -- bitcoin, options, you name it. But I do it with hard cash to my name. If I lose a chunk of that I don't owe anyone anything. I just never thought spending someone else's money and then owing them was even anywhere close to my moral radar of things I would do. The only one time I took a debt is for a car when I had the cash to buy it but it was 2022 and I took a loan at 2% and put the balance of the car in treasury and municipal bonds at ~5% and paying back the loan slowly while selling off the bonds. I wouldn't take a loan if I didn't have the money. Before I could afford a car I just rented cars.
  - rcxdude 2y ago
    because the risk with debt is not being able to pay it back - and you are paying the lender for their side of that risk (generally paying less the more of that risk falls on your side, like secured debt). It's a service they are freely offering (and in fact benefits them disproportionately on average), I don't see how it's a moral issue at all.
    - dheera 2y ago
      The moral issue I have is that simply put, if I don't have the money for something, I wasn't meant to have that something. I need to earn the money for it, after which I deserve to have that something. However, the most basic clean-and-functional versions of basic necessities (food, water, shelter, and transportation) should be accessible to everyone working a full-time job, in my opinion, without having to spend other peoples' money. 3 out of those 4 are attainable even with a low-paying job, it's really just shelter that is the problem.
Dylan16807 2y ago
I agree that house prices should come down. But given that you need a home, what's the difference between $1000 in rent+fees and $1000 in mortgage+taxes+fees? Normally the biggest difference between renting and buying with debt is that you can stop renting. But you're not going to stop having a home.
- synergy20 2y ago
  my landlord friend told me, many of her tenants earn decent salary, definitely more than her income, they can even spend $8000 or more to remodel a car or things like that, but can never save up to the 20% down payment ever.
  - bmicraft 2y ago
    > spend $8000 or more to remodel a car > can never save up to the 20% down payment something tells me those two things are connected
    - brailsafe 2y ago
      Well, at that rate, one could not remodel 15 cars and maybe have enough for the down payment on a studio in some markets. Or one could remodel a car and give up on home ownership, because it seems like a losing idea atm, and they'll have pursued something they find fruitful for the time being. At least they'll have the car in common with their boomer neighbors.
  - deleted 2y ago
    [deleted]
  - throwaway2037 2y ago
    > remodel a car What does this mean?
    - chasd00 2y ago
      Restore a classic or like high performance (or other) customizations.
jjcm 2y ago
> I never understood buying things that I can't afford. I think even if you choose not to use debt as a mechanism, you should understand why it's used as a mechanism, much like the parent comment has. Debt as a mechanism is not a bad thing - there's ample proof out there that availability of credit is an extremely strong indicator of future economic activity at the macro level.
zharknado 2y ago
I think halal mortgages are instructive on this point. To be clear, I’m not Muslim nor a lending expert, I just think it’s a really interesting setup. As I understand it, sharia law forbids paying interest, so a conventional mortgage is not an option for adherents. However, several different mechanisms are allowed by which the purchaser gradually gains full ownership of the home. E.g. one is roughly equivalent to a rent-to-own agreement. The financier still gains a profit that reflects the risk their upfront investment is subject to. What I find interesting is a recognition that some people need a lot of time to attain homeownership, and it may be valuable to let them live in the home before they fully achieve it, despite the outright rejection of lending as the mechanism.
- dheera 2y ago
  Well damn, can I just take out $10M in personal loans, tell them my religion doesn't believe in paying interest, buy Treasury bonds with it, and live off the interest?
  - dtx1 2y ago
    If you find someone who lends you 10M interest free sure
t0bia_s 2y ago
I agree. I think current economical "norm" of having debt is made for purpose by states and banks. Because when you have debt, you will be more obedient citizen, always voting in favor of system that gives "benefits" of using money that you don't own. With price of loosing our freedom with every new regulations.
jjav 2y ago
> I never understood buying things that I can't afford. For most things, that's a wise philosophy. Going into debt for something that depreciates like cars or furniture or electronics, is not wise. Housing is different though for several reasons. One is that you must live somewhere. So (unless being homeless in an option) you have to pay for housing one way or the other. So you either buy (build equity) or rent (a pure expense). Another reason is that a house may (often does) appreciate in value so you're leveraging that debt to make money. Even if it depreciates, it hardly ever depreciates faster than paying rent. Another reason is that rents always go up, a mortgage locks in your cost for the next 30 years.
GuB-42 2y ago
You can think of a mortgage like renting a house from your bank. Or a bit more precisely, for the time the mortgage is running, you and the bank are essentially co-owners, and you rent the share you don't own from the bank (that would be the interests) while at the same time, you buy the bank share bit by bit (that would be the principal). At the end, you become a full owner and stop paying "rent" to the bank.

beryilma 2y ago

Owning a house does not mean not owing anyone a cent. You still owe multiple types of taxes to the government. You still need to get insurance. You still need to make repairs. I actually find piece of mind in renting. I can always say screw it and move to the cheapest part of the country as I am getting closer to retirement age.

rnewme 2y ago
Selling that house before moving to the country side is surely amount to something
geraldwhen 2y ago
You can buy better neighbors with a house, and less crime.
- gwbas1c 2y ago
  > You can buy better neighbors with a house, and less crime. I wish! I built a fancy house in a fancy neighborhood, and then a real a-hole bought the house next to me as his retirement home.
  - bddgyrdfv 2y ago
    I feel this. Unfortunately the only surefire way to avoid this situation is to be the bigger asshole.
    - chihuahua 2y ago
      Not the only way. You can do what Bill Gates did, and buy all the surrounding properties. In his case, some of his staff live there.
      - r00fus 2y ago
        Billionaires do this - Zuckerberg did the same.

lr4444lr 2y ago

To each his own, but I get more peace of mind with a larger retirement account due to the low fixed rates we had in the US from 2009 to around 2022. I can't liquidate my house piecemeal when I need money like I can my brokerage assets.

VelesDude 2y ago
This is one of those areas the Australian government has done ok in. Mandatory superannuation retirement funds. 11% (?) of all pay goes into this fund to be invested. Thus you can pay off the house and have an investment fund at the same time. You can withdraw from your fund if you have a hardship but it is generally considered best to not touch it.
- silverquiet 2y ago
  I have a house and a brokerage account that’s worth a few times my what my house is (it’s rather modest). Nothing is stopping an American from doing both other than their own priorities (and I’ve neglected areas that other people find important - I rarely travel and drive a beater car for instance; to each their own).
  - VelesDude 2y ago
    Pretty much. While it is mandated here, there is nothing stopping others form doing the same. On my end it is just a manner of optics. The money being put aside, I never see week to week thus it just seems like an added bonus even though it is really just a part of the pay cycle.
    - silverquiet 2y ago
      We have private tax-advantaged plans that work essentially like that, but they are totally optional. Interestingly the only system that is mandatory is our “Social Security” - you are obligated to pay in but the money is pooled; you get something akin to shares in the system, but it only entitles you to a specific payout after a certain age; your contributions are not privately owned. Unusually for these types of discussions, it seems like the US system is more socialized than the alternative in your country.

slyall 2y ago

A house is not a zero-risk investment. Any number of reasons from Natural disaster on down could cause it to lose much of it's value or even become uninhabitable. Possibly in a way that insurance wouldn't cover. Think of people who owned houses in declining industrial cities. The local economy went bad, their house value went down and they faced a barrier to moving since they couldn't sell, move, and get a comparable house in a city with better prospects.

dusted 2y ago
it's still not a high risk, owning a house (that is, having paid for it, not owing any money to the bank) still leaves you in a better position than a renter, as you can basically let it burn and will still be in an easier position to get a loan for a new house in another place if you really need to
- slyall 2y ago
  So you are saying somebody with $500k of investments is worse off than somebody whose house just went from $500k to to $200k ?