I got tired of renting, and I looked it up, I realized I'm paying the equivalent of a $300k property for a standard 30-year mortgage in rent. And a $300k house is much nicer than my apartment.
I saw a $50k condo down the road from me. It looks not quite as good as my current apartment. Getting a mortgage for something like that is much better than renting, right?
If you can try for a house instead of a condo, they hold and increase their value much better. But a mortgage is (almost) always better than rent, you're building equity not just handing cash over to a scum lord.
Yes. Even with mortgage insurance it's still cheaper than renting. Only potential downside is you're more tied down to that particular unit than with renting, but if you're ok with that, then there's no reason not to buy.
Financially, if you can afford to put together a down payment, it's almost certainly a better deal. Rent and a 30 year mortgage tend to be similar monthly payments, but you actually get some of the mortgage money back if you sell (and stop having to pay at all if you live there 30 years). The biggest downside is a little more hassle on the way in, and some weird financial logistics on the way out if you want to buy another one. There's also the risk of the house price crashing, but you can always go bankrupt.
Ideologically, it makes you beholden to a bank, and those are evil. But landlords are even more evil, and probably have a mortgage on the place anyway, so it's not like you're winning something by avoiding the bank.
I very recently made the jump to home ownership (like literally yesterday lol) because I was ready to put down roots.
As an investment, home appreciation is a very poor way to make money and I don’t think it’s all that much better than renting. The only reason why home ownership is a decent investment at all is because the tax code has shit like the mortgage interest deduction which is a big tax write off for people with mortgages and the SALT deduction which is a big tax write off for people with high property taxes.
Furthermore, note that for most of your mortgage, the costs of mortgage interest, home maintenance/condo fees, property taxes, and homeowners insurance are going to be WAY more than the principal. All of these costs - except the principal - are functionally the same as paying rent.
On average, 75% of a homeowners monthly housing costs will go to things other than the principal (and that’s after the tax deductions), so home ownership is 75% the same as renting from a bottom line perspective.
So, now you see that as a homeowner you’re only investing about 1/4 of your housing costs into home equity (the other 3/4 are being flushed down the toilet just like renting).
Home appreciation isn’t that great an investment. You only get the money from your home appreciation when you sell, and the act of selling your home itself costs a solid $10k or more (so, you’re paying a year’s rent for the privilege of selling your home). It’s a fucking terrible investment! Compare that to the stock market. If you sucked it up, rented your home, and put your savings in the stock market you would do FAR better than if you bought a home.
Because of the astronomical costs of buying and selling real estate, if you don’t live in the home you bought for at least 5-10 years (and probably closer to 10), it’s just flat out worse than renting. Renting, btw, is probably the most underrated personal finance decision you can make IMO.
The reason why home ownership is the source of so much middle class wealth is not because it’s a good investment. It’s because people need homes, it’s marginally (at best) better than renting, and it just happens to be where people put their wealth (The real money is in landlording, not home ownership).
Matt Bruenig goes into better detail here, but the tldr is that home ownership is a dogshit investment and you should only do it if you actually want to own your home.
https://mattbruenig.com/2021/08/05/home-ownership-is-still-mostly-renting/
And btw - when you say you’re paying the equivalent of a 300k home mortgage in rent, does that include property taxes, insurance, the principal and interest, plus another 3000-5000 dollars in annual home maintenance (or condo fees)? If not, then you aren’t comparing apples to apples. You HAVE to budget home maintenance into your housing costs if you’re a homeowner.
Absolutely, if you have the money and are in the right life situation, renting is a huge scam.
It's a simple question; would you rather pay your own mortgage or someone else's?
Lol, now that you put it like that.
I think I'm going to at least look at it. With how much I currently make (and my boss hinted a raise for me, if I don't get it, I can work elsewhere to get it, it's not like there's a shortage of places needing IT guys), I could pay that mortgage in MUCH less than 10 years. Even if the condo is shit, I'd rather live in shit and have money than live in a polished turd, paycheck to paycheck.
I definitely don't recommend making any investments based on a raise you don't have yet or a possibility of a better job you don't have guaranteed. Never a good idea to count your chickens before you even have any eggs to hatch.
30 years from now, do you want to be able to sell the house and pocket 200K , or do you want your landlord to sell the house, kick you out, and pocket 200K?
I think it depends on location and other things. If the mortgage is too high then in theory you could have paid rent, invested the difference in some boring mutual index fund, and made out with more money. You also can't just leave, you're responsible for fixing shit, etc. It's an analytical question - sometimes there's a right answer, other times it's a question of priorities, and other times still there's no wrong answer. Personally I tend towards not having any relationships with
landlordspeople of property or living in Am*rica.you’re responsible for fixing shit
On the other hand, you actually can fix shit rather than waiting for your landlord to hopefully get around to fixing it at some point in the future
renting is only a "good" idea when you are living in a spot for a short time, meaning a few years. Go for the mortgage if the unit is adequate, but always be weary.
If you can afford a 15-year mortgage on that condo, the interest rate is better and credit unions will usually not sell your loan to a larger bank if it's 15 years or less. That way you can pay your local credit union directly instead of a super evil megabank that may end up selling it to another megabank.
If anyone is in a position to think about mortgages, then this is a handy tool. Throw the green/yellow/red "recommendation zone" completely in the trash and just use the slider to see where you land when you set the monthly payment to a comfortable amount of course, bit it can give some perspective on how things might pencil out when you're ready to make a move.
If you can secure the debit, then yeah, I could be.
(gonna be USA centric for a bit). Don't forget to factor in the Home Owners Insurance and Property Taxes as part of your yearly expenses for having a mortgage as well.
If you can come up with a down payment and/or qualify for a FHA/VA/subsidized loan, it might be a good idea. Be sure to shop around for lenders (a credit union is probably best). Find out your credit score and maybe wait 6 months or a year and try to improve it if need be. Find out what other additional costs there might be like HOA fees, insurance, utilities, maintenance, etc. Do the (free) Freddie Mac first time home buyer class online, it will help you understand the process and might get you a little off your interest rate. There might be state subsidized condos in your area but they often have income requirements and/or certain caveats when buying or selling them so they might not be a good deal.
All that said, $50k is a helluva deal (depending on where you live) and you should jump on that (if you can afford it and it suits your needs).
