6 ms·

The only mortgages that don't require cashflow are the paid off mortgages. Even if someone has a year of savings, or two years, or three, after that amount is d

The only mortgages that don't require cashflow are the paid off mortgages. Even if someone has a year of savings, or two years, or three, after that amount is drained, they need cash flow again. So how does one buy a house without being dependent on cash flow?

mulmen 2y ago
Well the most obvious approach would be to pay cash. The more fiscally conservative option is to only borrow money if you have capital which is earning income at a higher rate than the mortgage. This probably necessitates having more capital than the house costs.
- xeromal 2y ago
  The problem with that is that unless you have an extremely well paying job or rich parents, you have to outsave inflation and rising house prices. You may never own. Getting a loan just locks you into an inflation proof price as a "forced" savings. I don't think it's realistic at all for 85% of Americans to save for a new house.
  - mulmen 2y ago
    Yes, it’s a tragedy of the commons. That doesn’t make taking on a loan you can’t afford less of a bad idea. House prices are unaffordable because people take on loans they can’t afford. This reinforces the unaffordable prices. If milk was $40.00 a gallon you’d just stop putting it on cereal and eventually farmers get the message. Houses are the same thing. If you can’t comfortably afford a house then don’t buy it. You’re stuck renting or buying something more modest. This isn’t complicated. The idea that house prices can only go up is delusional. Nothing about a house is uniquely inflation proof or even inflation resistant. This isn’t the only investment vehicle available to you. This idea that houses are an important part of financial security is putting the cart in front of the horse. It leads to the NIMBYism that prevents additional supply from being built because prices must always go up. We all exist in the same economy and no action happens in a vacuum. When you buy something you have reduced supply and applied upward pressure on price. Individually this effect is so small it is immeasurable. In aggregate it isn’t.
    - Cthulhu_ 2y ago
      This was a failure of regulation, not just in the US but elsewhere too; banks and mortgage brokers weren't doing their due diligence and were giving out loans and mortgages that people couldn't afford based on their income and other outstanding debts, eventually leading to the 2007/8 financial crisis. Which should have been a lesson, but five years later, housing prices recovered and ballooned. I don't know why besides increased demand and reduced availability, clearly people can still get mortgages despite the lessons learned from the crisis.
      - mulmen 2y ago
        In my immediate social circle it’s people paying over half their income toward a mortgage, often also lighting money on fire for PMI.
  - itake 2y ago
    If you save $2.5k/mo for 15 years, after 14 years (mid-30s), you’d have $800k at 8% interest. Even in Seattle, $800k would get you a decent starter home. (I chose $2.5k, bc 15 years ago out of college, that’s how much I saved living in GA on a $70k salary). I saved even more when I move to California in my mid 20s.
    - xeromal 2y ago
      That' assuming houses don't go up in price though right? Also I think it's pretty rare for people to have the mental fortitude to save 2.5k a month for a house on top of living expenses, rent, and trying to build your retirement / savings / emergency fund. It's definitely possible but I think it's out of reach for the average person.
      - mulmen 2y ago
        > That' assuming houses don't go up in price though right? No, it isn’t. You can invest your savings. If you had put $2,500.00 a month into SPY500 since October 2009 (15 years ago) you’d have $1,388,302.13 today. https://dqydj.com/sp-500-periodic-reinvestment-calculator-dividends/ https://dqydj.com/sp-500-periodic-reinvestment-calculator-di... > Also I think it's pretty rare for people to have the mental fortitude to save 2.5k a month for a house on top of living expenses, rent, and trying to build your retirement / savings / emergency fund. How is saving for a house “on top of” literally “saving”? If you can save for retirement, savings, and emergencies then you have the mental fortitude to save for a house. People are bad with money, we know that. One of the best examples is buying a house they can’t afford. > It's definitely possible but I think it's out of reach for the average person. Yes, agree.
        xeromal 2y ago
        Yeah, I just think examples like this need to work for the masses in order to be useful otherwise they're just pie in the sky advice like abstinence to prevent childbirth. It does work and it's 100% effective but humans are horny. Same with saving this amount of money, there's a select few that can pull it off but most are incapable. Those are the people advice is for
ghaff 2y ago
Well, you need cashflow on a house in general. Even with a paid-off mortgage, I'm easily $10K/year and probably closer to $20K if I'm not pushing various stuff off.
- sokoloff 2y ago
  Property tax alone is around $13K/yr for me. Insurance is another couple grand. Only after that comes wear and tear and maintenance items.
  - herf 2y ago
    If you pay cash for a house and put 60% more in an annuity, you cover the total costs. Not cheap though.
    - ghaff 2y ago
      The point is that, however you finance it, owning a paid-for place will often have significant ongoing costs. Some more, some less.
    - phonon 2y ago
      Why would you forgo the mortgage interest tax deduction?
      - ghaff 2y ago
        For modestly-priced houses at least may not hit deductions these days.
      - sgerenser 2y ago
        2025 standard deduction is $30k for MFJ. Ain’t many people passing that mark these days in itemized deductions so the mortgage interest deduction is moot.
jonkho 2y ago
If the problem is the mortgage then rent /s. If the problem is you need money to pay the bills, well I got news for you…

mulmen 2y ago

Well the most obvious approach would be to pay cash. The more fiscally conservative option is to only borrow money if you have capital which is earning income at a higher rate than the mortgage. This probably necessitates having more capital than the house costs.

xeromal 2y ago
The problem with that is that unless you have an extremely well paying job or rich parents, you have to outsave inflation and rising house prices. You may never own. Getting a loan just locks you into an inflation proof price as a "forced" savings. I don't think it's realistic at all for 85% of Americans to save for a new house.
- mulmen 2y ago
  Yes, it’s a tragedy of the commons. That doesn’t make taking on a loan you can’t afford less of a bad idea. House prices are unaffordable because people take on loans they can’t afford. This reinforces the unaffordable prices. If milk was $40.00 a gallon you’d just stop putting it on cereal and eventually farmers get the message. Houses are the same thing. If you can’t comfortably afford a house then don’t buy it. You’re stuck renting or buying something more modest. This isn’t complicated. The idea that house prices can only go up is delusional. Nothing about a house is uniquely inflation proof or even inflation resistant. This isn’t the only investment vehicle available to you. This idea that houses are an important part of financial security is putting the cart in front of the horse. It leads to the NIMBYism that prevents additional supply from being built because prices must always go up. We all exist in the same economy and no action happens in a vacuum. When you buy something you have reduced supply and applied upward pressure on price. Individually this effect is so small it is immeasurable. In aggregate it isn’t.
  - Cthulhu_ 2y ago
    This was a failure of regulation, not just in the US but elsewhere too; banks and mortgage brokers weren't doing their due diligence and were giving out loans and mortgages that people couldn't afford based on their income and other outstanding debts, eventually leading to the 2007/8 financial crisis. Which should have been a lesson, but five years later, housing prices recovered and ballooned. I don't know why besides increased demand and reduced availability, clearly people can still get mortgages despite the lessons learned from the crisis.
    - mulmen 2y ago
      In my immediate social circle it’s people paying over half their income toward a mortgage, often also lighting money on fire for PMI.
- itake 2y ago
  If you save $2.5k/mo for 15 years, after 14 years (mid-30s), you’d have $800k at 8% interest. Even in Seattle, $800k would get you a decent starter home. (I chose $2.5k, bc 15 years ago out of college, that’s how much I saved living in GA on a $70k salary). I saved even more when I move to California in my mid 20s.
  - xeromal 2y ago
    That' assuming houses don't go up in price though right? Also I think it's pretty rare for people to have the mental fortitude to save 2.5k a month for a house on top of living expenses, rent, and trying to build your retirement / savings / emergency fund. It's definitely possible but I think it's out of reach for the average person.
    - mulmen 2y ago
      > That' assuming houses don't go up in price though right? No, it isn’t. You can invest your savings. If you had put $2,500.00 a month into SPY500 since October 2009 (15 years ago) you’d have $1,388,302.13 today. https://dqydj.com/sp-500-periodic-reinvestment-calculator-dividends/ https://dqydj.com/sp-500-periodic-reinvestment-calculator-di... > Also I think it's pretty rare for people to have the mental fortitude to save 2.5k a month for a house on top of living expenses, rent, and trying to build your retirement / savings / emergency fund. How is saving for a house “on top of” literally “saving”? If you can save for retirement, savings, and emergencies then you have the mental fortitude to save for a house. People are bad with money, we know that. One of the best examples is buying a house they can’t afford. > It's definitely possible but I think it's out of reach for the average person. Yes, agree.
      - xeromal 2y ago
        Yeah, I just think examples like this need to work for the masses in order to be useful otherwise they're just pie in the sky advice like abstinence to prevent childbirth. It does work and it's 100% effective but humans are horny. Same with saving this amount of money, there's a select few that can pull it off but most are incapable. Those are the people advice is for

ghaff 2y ago

Well, you need cashflow on a house in general. Even with a paid-off mortgage, I'm easily $10K/year and probably closer to $20K if I'm not pushing various stuff off.

sokoloff 2y ago
Property tax alone is around $13K/yr for me. Insurance is another couple grand. Only after that comes wear and tear and maintenance items.
- herf 2y ago
  If you pay cash for a house and put 60% more in an annuity, you cover the total costs. Not cheap though.
  - ghaff 2y ago
    The point is that, however you finance it, owning a paid-for place will often have significant ongoing costs. Some more, some less.
  - phonon 2y ago
    Why would you forgo the mortgage interest tax deduction?
    - ghaff 2y ago
      For modestly-priced houses at least may not hit deductions these days.
    - sgerenser 2y ago
      2025 standard deduction is $30k for MFJ. Ain’t many people passing that mark these days in itemized deductions so the mortgage interest deduction is moot.

jonkho 2y ago

If the problem is the mortgage then rent /s. If the problem is you need money to pay the bills, well I got news for you…