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Do you also think that way about buying a house with a mortgage (credit)? I don't. A mortgage isn't used to make more money. It's used so people can own a hous

Do you also think that way about buying a house with a mortgage (credit)? I don't. A mortgage isn't used to make more money. It's used so people can own a house after saving for a few years, rather than waiting until they've saved for a few decades.

leereeves 1y ago
Often, a mortgage is either used to make money (from rising house prices) or save money (when the mortgage is cheaper than rent).
- jltsiren 1y ago
  Often, houses are depreciating assets that are expensive to maintain, but people take mortgage and buy them anyway. Often, renting is cheaper than buying, but people buy anyway, because they like the idea of owning their home. Often, people buy a home, because suitable homes are not available to rent. Money is only a means to an end. It has no inherent value. And very often, the subjective value of a thing is essentially unrelated to the monetary value.
  - rwmj 1y ago
    In addition, you get countries like the UK where renting is very precarious. You might be forced to move every year, after a year your landlord can turf you out with only a few months' notice, you aren't allowed to modify the house in any way even putting a picture-hook into the wall or redecorating a room, etc. Since most people cannot afford to buy a house outright, a mortgage is necessary to avoid this.
  - JKCalhoun 1y ago
    You can believe that if you like of course, but I am definitely not teaching my children that. Renting cheaper than owning sounds like a very short-term view. My dad explained to me the nice thing about a 30 year fixed mortgage in simple terms: 10, 20, up to 30 years later ... your "rent" is the same. It's a simple experiment to see what a person's rent was going for 30 years ago in your community and then see what a person with a typical 30-year mortgage would have paid each month 30 years ago. Because one of those two is still paying the same monthly amount today and about to have an asset they can pass along to their kids or spouse (or cash-out if they want to retire to live in a trailer in Eloy, Arizona).
    - jltsiren 1y ago
      There are plenty of places where many people can afford market-rate rentals, while there is nothing they can afford to buy. That includes some major cities, where land is inherently scarce, as well as other desirable locations, where the locals have chosen to ban sufficient housing. Rents are ultimately based on what people can afford to pay. Home prices, on the other hand, also reflect the viability of the home as an investment. If the market believes that housing will not become more affordable in the foreseeable future, homes in that area are low-risk investments, and investors will accept lower returns for their money. Home prices grow very high relative to rents. Taking a mortgage to buy then becomes the financial equivalent of taking a loan and putting the money in a savings account. The city where I live in California is one of those places. Before Covid, home prices were high but tolerable. Then the prices jumped due to WFH, while rents grew at a much slower pace. And then interest rates went up without making a dent in home prices, making homes too expensive for those poor enough to need a substantial mortgage.
    - cbdumas 1y ago
      NYTimes publishes a fantastic calculator [0] to help make this kind of rent vs. buy decision. It's not always that clear cut. [0] https://www.nytimes.com/interactive/2024/upshot/buy-rent-calculator.html https://www.nytimes.com/interactive/2024/upshot/buy-rent-cal...
    - lxgr 1y ago
      > Renting cheaper than owning sounds like a very short-term view. That highly depends on where you live. In some countries/cities, buying really makes no sense both short and long term. In others, it absolutely might.
  - FireBeyond 1y ago
    There are maintenance requirements to home ownership, absolutely. And some are not cheap. But there is absolutely a segment on HN who will act like home ownership is nothing more than pulling out a card for the next four digit expense every month or more. “What are you going to do when (not if) you hot water dies? And then you need a roof? Oops your house needs painting and new appliances and now the AC is gone too, what about pest control, and hopefully your sewer line doesn’t collapse? Can’t handle all that happening to you? Can you realllly afford a house then?”
IsTom 1y ago
You need to compare money paid for mortgage minus price of house against money paid for rent (when you're left with no assets after all the years of paying it).
- cbdumas 1y ago
  NYTimes has a great calculator for doing just that https://www.nytimes.com/interactive/2024/upshot/buy-rent-calculator.html https://www.nytimes.com/interactive/2024/upshot/buy-rent-cal...
eadmund 1y ago
A mortgage doesn’t make money, but it (can) enable spending less money. If you buy a place such that interest, maintenance, insurance, taxes and the opportunity cost of not being able to easily relocate are less than rent, then you have saved the difference. It’s also a way to force saving, which is psychologically useful (and thus valuable).
- ta1243 1y ago
  If you buy a house for 500k on a 5% mortgage over 25 years when you are 25, and you plan to live until you are 85, you will live there for 60 years. It will cost you 35k a year for 25 years, or 875k a year After 25 years you have no more expenses. If instead you rent it for 20k a year, increasing with 2% inflation each year, by year 25 you're paying 33k a year in rent, and by year 60 you're paying 66k a year. Over 60 years you pay 2.4m in rent, or 900k in mortgage (you could also then sell that house for 1.6m with a 2% annual inflation). You'd have to invest the savings and get way higher than inflation returns to break even. Of course there's maintenance costs of the house too, but that's with rent far cheaper than the mortgage. In reality rent tends to be a similar amount as a mortgage (in the UK it tends to be higher - as people won't rent places out if they aren't covering their mortgage - at the very least the interest part of it). You'll likely find house prices appreciating more than inflation too - just like stock prices do. Rent tends to track income. Now you could argue that you'll get more by investing in high return growth stocks. And you might be right. In the 80s there was a whole "endownment" mortgage craze where you paid the interest on the mortgage, and then the rest rather than paying down the mortgage capital, instead was invested. This was a massive scandal as many investments didn't have enough to cover the mortgage amount upon maturity. With a mortgage you know that no matter what happens with inflation, growth, returns, stock crashes etc, you will own one house after X years.
  - lesuorac 1y ago
    > You'd have to invest the savings and get way higher than inflation returns to break even. You say that like it's a difficult thing to do. S&P500 is up 710% since 1996. Gold is up 92% since 2012. Personally, the rent control is the best part of a mortgage and even though renting is typically better, I'm fine paying a premium for that. That said, good luck getting somebody to loan you 900k so you can play the stock market; it's much easier to get that for a house though.
jacekm 1y ago
I do. Housing prices are constantly rising, when you take a loan you are buying an asset which (with some luck) may appreciate in value more than mortgage interest rates. That's why in some countries it's worth taking a loan as soon as possible without saving for too long. Sure, without mortgage you may not be able to afford a house at all but it does not change the fact that mortgage is a "good" loan (i.e. you benefit from taking it)
- bboygravity 1y ago
  Mortgages with low interest rates are also one of the (main) reasons houses are so "expensive" in the first place. The cheaper money (credit) is, the "higher" the prices will go. It's not so much that houses became expensive, it's more that money to buy a house (specifically mortgages) became relatively cheaper. Low interest rates did that.
  - matthewdgreen 1y ago
    This is a one-time effect, though. Or at least, an effect that only changes periodically (and should reverse) when interest rates change. 30-year mortgages have been standard in the US for most of my life, and houses have gotten a lot more expensive during that time.
    - Retric 1y ago
      Mortgage loans have been getting cheaper due to automation and the commoditization of loans / increase in surplus capital. That then pushes up home prices over time relative to inflation.
      - matthewdgreen 1y ago
        Home prices have doubled in most areas since 2009 (and worse in many areas.) when people complain about prices in 2025, this is what they’re talking about. This is not driven by the novel existence of 30-year mortgages and interest rates are at a near-term high.
hk1337 1y ago
- They’re giving you a line of credit, money you don’t have, to buy a house. - Why else would mortgage loans ave percentage rates if not to make money off lending you money?
- alpinisme 1y ago
  The parent comment was about how you should only take loans if you expect a return on the investment greater than the interest. Not about the bank.
- walthamstow 1y ago
  I think you've misread. The thread is about consumers of credit using it to make themselves money.
- JKCalhoun 1y ago
  Of course they make money — but they take on no real risk. The home owner (who is taking on the risk) likely stands to make much more money than the lender in appreciation. (Never mind the homeowner has to live somewhere regardless — and anywhere but mom's basement [1] is going to charge rent which would, by comparison, be throwing money away.) [1] Okay, my mom charged me rent to live in her basement when I was 19 or 20 and needed a place over the summer.
zblevins 1y ago
Yes, though I’d add that a house is generally viewed as an investment, unlike something like a car, which typically depreciates in value.
QuadmasterXLII 1y ago
I bought a house when I did because the interest on a mortgage was lower than any reasonable prediction fir inflation, which seemed a lot like free money; but at the time it felt a lot more like a dirty hack taking advantage of terrible government policy than any idealistic system where credit is used to bootstrap productive capitalization.
- phkahler 1y ago
  Low interest rates tend to just push housing prices up. The average expenditure on housing as a percent of income have been nearly constant in the US for 50 years.
  - haiku2077 1y ago
    Yes but I get to keep the equity in the house. I don't keep anything I pay towards interest.
SkyBelow 1y ago
Shelter (and, for many, transportation) are a need for maintaining their ability to make money. As such there is some minimum amount that must be spent on these, and loans costing up to that amount can be seen as ways of making money. Most people who make these purchases do buy even more than strictly necessary, and the extra spent above the strictly necessary line should be seen as luxury expenses. General advice for homes leads to buying a home that does follow the logic, given historic movement of home prices and rental prices. It rarely is put in those terms, but works. For vehicles, the financial recommendation generally is to buy less car as it is a depreciating asset. If you have cash for a luxury expense, then it is no different from any other large luxury purchase, but if you have to finance, go as cheap as possible (but making sure to account for the repair costs, fuel usage, and such, not just the initial cost and loan payments).

leereeves 1y ago

Often, a mortgage is either used to make money (from rising house prices) or save money (when the mortgage is cheaper than rent).

jltsiren 1y ago
Often, houses are depreciating assets that are expensive to maintain, but people take mortgage and buy them anyway. Often, renting is cheaper than buying, but people buy anyway, because they like the idea of owning their home. Often, people buy a home, because suitable homes are not available to rent. Money is only a means to an end. It has no inherent value. And very often, the subjective value of a thing is essentially unrelated to the monetary value.
- rwmj 1y ago
  In addition, you get countries like the UK where renting is very precarious. You might be forced to move every year, after a year your landlord can turf you out with only a few months' notice, you aren't allowed to modify the house in any way even putting a picture-hook into the wall or redecorating a room, etc. Since most people cannot afford to buy a house outright, a mortgage is necessary to avoid this.
- JKCalhoun 1y ago
  You can believe that if you like of course, but I am definitely not teaching my children that. Renting cheaper than owning sounds like a very short-term view. My dad explained to me the nice thing about a 30 year fixed mortgage in simple terms: 10, 20, up to 30 years later ... your "rent" is the same. It's a simple experiment to see what a person's rent was going for 30 years ago in your community and then see what a person with a typical 30-year mortgage would have paid each month 30 years ago. Because one of those two is still paying the same monthly amount today and about to have an asset they can pass along to their kids or spouse (or cash-out if they want to retire to live in a trailer in Eloy, Arizona).
  - jltsiren 1y ago
    There are plenty of places where many people can afford market-rate rentals, while there is nothing they can afford to buy. That includes some major cities, where land is inherently scarce, as well as other desirable locations, where the locals have chosen to ban sufficient housing. Rents are ultimately based on what people can afford to pay. Home prices, on the other hand, also reflect the viability of the home as an investment. If the market believes that housing will not become more affordable in the foreseeable future, homes in that area are low-risk investments, and investors will accept lower returns for their money. Home prices grow very high relative to rents. Taking a mortgage to buy then becomes the financial equivalent of taking a loan and putting the money in a savings account. The city where I live in California is one of those places. Before Covid, home prices were high but tolerable. Then the prices jumped due to WFH, while rents grew at a much slower pace. And then interest rates went up without making a dent in home prices, making homes too expensive for those poor enough to need a substantial mortgage.
  - cbdumas 1y ago
    NYTimes publishes a fantastic calculator [0] to help make this kind of rent vs. buy decision. It's not always that clear cut. [0] https://www.nytimes.com/interactive/2024/upshot/buy-rent-calculator.html https://www.nytimes.com/interactive/2024/upshot/buy-rent-cal...
  - lxgr 1y ago
    > Renting cheaper than owning sounds like a very short-term view. That highly depends on where you live. In some countries/cities, buying really makes no sense both short and long term. In others, it absolutely might.
- FireBeyond 1y ago
  There are maintenance requirements to home ownership, absolutely. And some are not cheap. But there is absolutely a segment on HN who will act like home ownership is nothing more than pulling out a card for the next four digit expense every month or more. “What are you going to do when (not if) you hot water dies? And then you need a roof? Oops your house needs painting and new appliances and now the AC is gone too, what about pest control, and hopefully your sewer line doesn’t collapse? Can’t handle all that happening to you? Can you realllly afford a house then?”

IsTom 1y ago

You need to compare money paid for mortgage minus price of house against money paid for rent (when you're left with no assets after all the years of paying it).

cbdumas 1y ago
NYTimes has a great calculator for doing just that https://www.nytimes.com/interactive/2024/upshot/buy-rent-calculator.html https://www.nytimes.com/interactive/2024/upshot/buy-rent-cal...

eadmund 1y ago

A mortgage doesn’t make money, but it (can) enable spending less money. If you buy a place such that interest, maintenance, insurance, taxes and the opportunity cost of not being able to easily relocate are less than rent, then you have saved the difference. It’s also a way to force saving, which is psychologically useful (and thus valuable).

ta1243 1y ago
If you buy a house for 500k on a 5% mortgage over 25 years when you are 25, and you plan to live until you are 85, you will live there for 60 years. It will cost you 35k a year for 25 years, or 875k a year After 25 years you have no more expenses. If instead you rent it for 20k a year, increasing with 2% inflation each year, by year 25 you're paying 33k a year in rent, and by year 60 you're paying 66k a year. Over 60 years you pay 2.4m in rent, or 900k in mortgage (you could also then sell that house for 1.6m with a 2% annual inflation). You'd have to invest the savings and get way higher than inflation returns to break even. Of course there's maintenance costs of the house too, but that's with rent far cheaper than the mortgage. In reality rent tends to be a similar amount as a mortgage (in the UK it tends to be higher - as people won't rent places out if they aren't covering their mortgage - at the very least the interest part of it). You'll likely find house prices appreciating more than inflation too - just like stock prices do. Rent tends to track income. Now you could argue that you'll get more by investing in high return growth stocks. And you might be right. In the 80s there was a whole "endownment" mortgage craze where you paid the interest on the mortgage, and then the rest rather than paying down the mortgage capital, instead was invested. This was a massive scandal as many investments didn't have enough to cover the mortgage amount upon maturity. With a mortgage you know that no matter what happens with inflation, growth, returns, stock crashes etc, you will own one house after X years.
- lesuorac 1y ago
  > You'd have to invest the savings and get way higher than inflation returns to break even. You say that like it's a difficult thing to do. S&P500 is up 710% since 1996. Gold is up 92% since 2012. Personally, the rent control is the best part of a mortgage and even though renting is typically better, I'm fine paying a premium for that. That said, good luck getting somebody to loan you 900k so you can play the stock market; it's much easier to get that for a house though.

jacekm 1y ago

I do. Housing prices are constantly rising, when you take a loan you are buying an asset which (with some luck) may appreciate in value more than mortgage interest rates. That's why in some countries it's worth taking a loan as soon as possible without saving for too long. Sure, without mortgage you may not be able to afford a house at all but it does not change the fact that mortgage is a "good" loan (i.e. you benefit from taking it)

bboygravity 1y ago
Mortgages with low interest rates are also one of the (main) reasons houses are so "expensive" in the first place. The cheaper money (credit) is, the "higher" the prices will go. It's not so much that houses became expensive, it's more that money to buy a house (specifically mortgages) became relatively cheaper. Low interest rates did that.
- matthewdgreen 1y ago
  This is a one-time effect, though. Or at least, an effect that only changes periodically (and should reverse) when interest rates change. 30-year mortgages have been standard in the US for most of my life, and houses have gotten a lot more expensive during that time.
  - Retric 1y ago
    Mortgage loans have been getting cheaper due to automation and the commoditization of loans / increase in surplus capital. That then pushes up home prices over time relative to inflation.
    - matthewdgreen 1y ago
      Home prices have doubled in most areas since 2009 (and worse in many areas.) when people complain about prices in 2025, this is what they’re talking about. This is not driven by the novel existence of 30-year mortgages and interest rates are at a near-term high.

hk1337 1y ago

- They’re giving you a line of credit, money you don’t have, to buy a house. - Why else would mortgage loans ave percentage rates if not to make money off lending you money?

alpinisme 1y ago
The parent comment was about how you should only take loans if you expect a return on the investment greater than the interest. Not about the bank.
walthamstow 1y ago
I think you've misread. The thread is about consumers of credit using it to make themselves money.
JKCalhoun 1y ago
Of course they make money — but they take on no real risk. The home owner (who is taking on the risk) likely stands to make much more money than the lender in appreciation. (Never mind the homeowner has to live somewhere regardless — and anywhere but mom's basement [1] is going to charge rent which would, by comparison, be throwing money away.) [1] Okay, my mom charged me rent to live in her basement when I was 19 or 20 and needed a place over the summer.

zblevins 1y ago

Yes, though I’d add that a house is generally viewed as an investment, unlike something like a car, which typically depreciates in value.

QuadmasterXLII 1y ago

I bought a house when I did because the interest on a mortgage was lower than any reasonable prediction fir inflation, which seemed a lot like free money; but at the time it felt a lot more like a dirty hack taking advantage of terrible government policy than any idealistic system where credit is used to bootstrap productive capitalization.

phkahler 1y ago
Low interest rates tend to just push housing prices up. The average expenditure on housing as a percent of income have been nearly constant in the US for 50 years.
- haiku2077 1y ago
  Yes but I get to keep the equity in the house. I don't keep anything I pay towards interest.

SkyBelow 1y ago

Shelter (and, for many, transportation) are a need for maintaining their ability to make money. As such there is some minimum amount that must be spent on these, and loans costing up to that amount can be seen as ways of making money. Most people who make these purchases do buy even more than strictly necessary, and the extra spent above the strictly necessary line should be seen as luxury expenses. General advice for homes leads to buying a home that does follow the logic, given historic movement of home prices and rental prices. It rarely is put in those terms, but works. For vehicles, the financial recommendation generally is to buy less car as it is a depreciating asset. If you have cash for a luxury expense, then it is no different from any other large luxury purchase, but if you have to finance, go as cheap as possible (but making sure to account for the repair costs, fuel usage, and such, not just the initial cost and loan payments).