4 ms·

> the money paid as rent is like throwing it into the sea! The same can be said of mortgage interest. The fair comparison to the renter with no savings is the

> the money paid as rent is like throwing it into the sea! The same can be said of mortgage interest. The fair comparison to the renter with no savings is the homeowner owing the full value of the house to the bank, and the fair comparison to a mortgage-less homeowner is a renter with investments and savings equal to the price of the house they're in. Better arguments for your position might be 1. Mortgage rates are lower than rental prices in many places, 2. Paying off a mortgage is "enforced savings". People leasing property mostly spend the difference instead of investing it. 3. Some kind of projection of house and rental prices rising more quickly than the market.

chii 14y ago
> Mortgage rates are lower than rental prices in many places, its unlikely that mortgage payments are lower than rent - otherwise, it'd be better to pay the mortgage than renting! You would buy a place, and rent out a room or two, and have the rent income plus your own money to pay the mortgage. I m not against renting - but i just don't want people to think that a mortgage is some baggage that they are better off not having, and instead just pay rent. I want people to make the smartest choices, so that the only way rent rises is because costs to build houses rise, not because the landlord got greedy. To me, rent is like a tax on being alive.
- philwelch 14y ago
  Rent and interest are both taxes on not being rich. I don't really see any reason one is intrinsically better than the other, but rent entails a lot less risk.
- lmm 14y ago
  >its unlikely that mortgage payments are lower than rent - otherwise, it'd be better to pay the mortgage than renting! You would buy a place, and rent out a room or two, and have the rent income plus your own money to pay the mortgage. I have friends doing just that. All it takes is the initial deposit capital (which many people don't have, or take years to save up) and credit rating.
- frobozz 14y ago
  >its unlikely that mortgage payments are lower than rent - otherwise, it'd be better to pay the mortgage than renting! In some places, they are, and it is. However, I would be incredibly surprised if there is anywhere where the mortgage payments on a 100% LTV mortgage are lower than rent; and this is one of the reasons why many settled people don't own their own home. They can't (yet) afford a sufficient deposit to make the repayments affordable.
  - fluidcruft 14y ago
    In my city (a) renting is with very, very few exceptions uniformly explicitly forbidden by home owner association agreements (bans that are now backed by recent state supreme court victories, the only places you can rent are in the small regions of the city that predate the explosive subdivision-based growth that started in the 70's--presumably driven by white flight, but I don't know for certain), (b) renting is made very unpalatable by a number of policies made by the city itself and (c) homestead property tax exemptions for homeowners that make owning very, very expensive if they don't live in their house themselves.
- ChuckMcM 14y ago
  There are various times where dislocations in the market make this more true than others. For example over the last 3 years due to the high foreclosure rate in Las Vegas Nevada you could buy a property for $125,000, leverage it at a 4% rate, an immediately rent it out for $1500 a month making it cash flow positive from the day you bought it. However, that situation was created by the mortgage crisis where these same houses had $300,000 mortgages with $2500 mortgage payments. Having watched prices in the bay area fluctuate I've seen the markets on both sides (renting was cheaper than buying and buying was cheaper than renting) at various times.
philwelch 14y ago
> 1. Mortgage rates are lower than rental prices in many places When this is true, this actually is a very convincing argument. Not only that, but you can effectively arbitrage yourself into a lot of wealth this way. You buy a house and move into it for awhile, but then you buy a new house, move into the new house, and rent out the old house. (You get better mortgage terms that way.) Rinse and repeat whenever you can afford to do so and you eventually end up with a large portfolio of profitable properties. Of course, it's arbitrage--if enough people do it, it stops working. You can keep it going with more money, if you can make larger down payments, since at that point you're turning a one time lump sum into an ongoing cash flow. But eventually you have to have more money to make money, so not even this might be workable.

chii 14y ago

> Mortgage rates are lower than rental prices in many places, its unlikely that mortgage payments are lower than rent - otherwise, it'd be better to pay the mortgage than renting! You would buy a place, and rent out a room or two, and have the rent income plus your own money to pay the mortgage. I m not against renting - but i just don't want people to think that a mortgage is some baggage that they are better off not having, and instead just pay rent. I want people to make the smartest choices, so that the only way rent rises is because costs to build houses rise, not because the landlord got greedy. To me, rent is like a tax on being alive.

philwelch 14y ago
Rent and interest are both taxes on not being rich. I don't really see any reason one is intrinsically better than the other, but rent entails a lot less risk.
lmm 14y ago
>its unlikely that mortgage payments are lower than rent - otherwise, it'd be better to pay the mortgage than renting! You would buy a place, and rent out a room or two, and have the rent income plus your own money to pay the mortgage. I have friends doing just that. All it takes is the initial deposit capital (which many people don't have, or take years to save up) and credit rating.
frobozz 14y ago
>its unlikely that mortgage payments are lower than rent - otherwise, it'd be better to pay the mortgage than renting! In some places, they are, and it is. However, I would be incredibly surprised if there is anywhere where the mortgage payments on a 100% LTV mortgage are lower than rent; and this is one of the reasons why many settled people don't own their own home. They can't (yet) afford a sufficient deposit to make the repayments affordable.
- fluidcruft 14y ago
  In my city (a) renting is with very, very few exceptions uniformly explicitly forbidden by home owner association agreements (bans that are now backed by recent state supreme court victories, the only places you can rent are in the small regions of the city that predate the explosive subdivision-based growth that started in the 70's--presumably driven by white flight, but I don't know for certain), (b) renting is made very unpalatable by a number of policies made by the city itself and (c) homestead property tax exemptions for homeowners that make owning very, very expensive if they don't live in their house themselves.
ChuckMcM 14y ago
There are various times where dislocations in the market make this more true than others. For example over the last 3 years due to the high foreclosure rate in Las Vegas Nevada you could buy a property for $125,000, leverage it at a 4% rate, an immediately rent it out for $1500 a month making it cash flow positive from the day you bought it. However, that situation was created by the mortgage crisis where these same houses had $300,000 mortgages with $2500 mortgage payments. Having watched prices in the bay area fluctuate I've seen the markets on both sides (renting was cheaper than buying and buying was cheaper than renting) at various times.

philwelch 14y ago

> 1. Mortgage rates are lower than rental prices in many places When this is true, this actually is a very convincing argument. Not only that, but you can effectively arbitrage yourself into a lot of wealth this way. You buy a house and move into it for awhile, but then you buy a new house, move into the new house, and rent out the old house. (You get better mortgage terms that way.) Rinse and repeat whenever you can afford to do so and you eventually end up with a large portfolio of profitable properties. Of course, it's arbitrage--if enough people do it, it stops working. You can keep it going with more money, if you can make larger down payments, since at that point you're turning a one time lump sum into an ongoing cash flow. But eventually you have to have more money to make money, so not even this might be workable.