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Old 08-22-2018, 01:46 PM
 
Location: NJ
22,745 posts, read 28,621,839 times
Reputation: 14646

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Quote:
Originally Posted by northshorenative View Post
Um - Because houses generally increase in value. You are "making money" on your loan.

Cars lose value. At some point you will owe more on your car than it is worth.


Borrowing money to purchase an appreciating asset is called investing. Borrowing money to purchase a decreasing asset is not.
you buy a house because you need a place to live. you buy a car because you need something to get you around. you borrow money because it makes more sense to borrow than to spend all your free cash (or you dont have the cash). if it makes sense to borrow money for a house, then it probably makes sense to borrow for a car if you can get a good interest rate.
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Old 08-22-2018, 03:13 PM
 
Location: TN
86 posts, read 39,492 times
Reputation: 195
Quote:
Originally Posted by CaptainNJ View Post
you buy a house because you need a place to live. you buy a car because you need something to get you around. you borrow money because it makes more sense to borrow than to spend all your free cash (or you dont have the cash). if it makes sense to borrow money for a house, then it probably makes sense to borrow for a car if you can get a good interest rate.

CaptainNJ, please don't get hung up on the good/bad debt part. Every individual situation is different. If someone can get a 0% or 1% car loan and they are holding their money in a savings account only earning 0.5% interest then they might be better off just paying cash for the car. On the other hand, if they would use funds that are in a bond mutual fund (for example) earning 5% interest then obviously they would take the loan.

The good/bad debt really pertains to a person's credit report. When you take out a loan (mortgage or car loan) it initially drops your FICO score. As you pay down the loan your score recovers. It recovers faster with a mortgage than it does for a car loan because with the mortgage you are building equity and with the car your asset is depreciating.

As far as your house not being an appreciating asset it all depends on time frame and location. If you buy a house in a stable market (not NY, CA, or FL) and hold the asset a minimum of 5 years you more than likely will not lose value unless the whole housing market crashes. The opposite is true with a car, as soon as you buy the car is starts to lose value and it will never increase in value higher than when you bought it, except that 1% of the time for whatever strange reason happens. I'm not saying that the article is wrong but with most of these articles about real estate they usually focus on the "high profile" markets like Miami, NYC, and CA. I live in middle America and even when the housing crisis hit in 2007 my home value only dropped 4% and within 2 years it was back positive.
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Old 08-22-2018, 04:44 PM
 
Location: Phoenix-Valley of the Sun
2,462 posts, read 1,209,000 times
Reputation: 3047
Quote:
Originally Posted by andyd522 View Post
CaptainNJ, please don't get hung up on the good/bad debt part. Every individual situation is different. If someone can get a 0% or 1% car loan and they are holding their money in a savings account only earning 0.5% interest then they might be better off just paying cash for the car. On the other hand, if they would use funds that are in a bond mutual fund (for example) earning 5% interest then obviously they would take the loan.

The good/bad debt really pertains to a person's credit report. When you take out a loan (mortgage or car loan) it initially drops your FICO score. As you pay down the loan your score recovers. It recovers faster with a mortgage than it does for a car loan because with the mortgage you are building equity and with the car your asset is depreciating.

As far as your house not being an appreciating asset it all depends on time frame and location. If you buy a house in a stable market (not NY, CA, or FL) and hold the asset a minimum of 5 years you more than likely will not lose value unless the whole housing market crashes. The opposite is true with a car, as soon as you buy the car is starts to lose value and it will never increase in value higher than when you bought it, except that 1% of the time for whatever strange reason happens. I'm not saying that the article is wrong but with most of these articles about real estate they usually focus on the "high profile" markets like Miami, NYC, and CA. I live in middle America and even when the housing crisis hit in 2007 my home value only dropped 4% and within 2 years it was back positive.
The housing crisis hit california hard. I lost about 40 percent of the value of my home. It came up since then...but still.

But it seemed like places like indianapolis didn't get affected by that crash at all....or not nearly as much.
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Old 08-22-2018, 09:30 PM
 
4,365 posts, read 5,292,845 times
Reputation: 4319
Iím not sure how anyone could argue that homes donít generally appreciate unless theyíre just trolling. Houses are way more expensive than they were 30 years ago. Every place I have owned is now worth more than whenever I bought or sold it.

Also obviously places in middle America didnít have a big drop in the recession, they never had a big gain! Nobody wanted to live in those places before and nobody wants to live there now, either. You need to live in desirable areas if you want to see larger or more consistent gains.
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Old 08-23-2018, 07:04 AM
Status: "The weather is beautiful:)" (set 1 day ago)
 
Location: Where the sun likes to shine!!
20,369 posts, read 25,524,356 times
Reputation: 87968
As with anything if you buy at a peak you will have to wait a long time to get your money back. Cars are not an investment. If you buy new as soon as you take it off the lot it loses some value. Houses can be an investment if you didn't buy during a peak. On the other hand if you are in an area where the carrying costs are very high it may be a wash. My MIL in NY just sold her home after 50 years. She made a great profit from what she bought it for "On Paper" but when you add in her $20,000 a year in property taxes, all of the maintenance, homeowner's insurance, and all the bills on a big house for 50 years she didn't really come out ahead.
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Old 08-23-2018, 09:07 AM
 
Location: NJ
22,745 posts, read 28,621,839 times
Reputation: 14646
Quote:
Originally Posted by JonathanLB View Post
I’m not sure how anyone could argue that homes don’t generally appreciate unless they’re just trolling. Houses are way more expensive than they were 30 years ago. Every place I have owned is now worth more than whenever I bought or sold it.

Also obviously places in middle America didn’t have a big drop in the recession, they never had a big gain! Nobody wanted to live in those places before and nobody wants to live there now, either. You need to live in desirable areas if you want to see larger or more consistent gains.
it generally appreciates. i know the lady i bought my last house from took about a $95k hit on the house. the current house i bought, the owner went bankrupt. if i take what he paid + the loan he took for renovation, he took a $745k hit. not exactly how it works, but good deal for me.

im not sure how this fits with the whole lifestyle creep thing. i think its pretty obvious that for the vast majority of people, the house is the biggest expense. so avoiding the housing upgrade can help limit lifestyle creep. my last house was a condo community of single family houses. my inability to do much on the exterior of my house and nothing on the property kept my expenses very stable for the years i lived there.
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Old 08-23-2018, 01:36 PM
 
Location: Formerly Pleasanton Ca, now in Marietta Ga
4,125 posts, read 3,416,251 times
Reputation: 5657
Quote:
Originally Posted by ylisa7 View Post
As with anything if you buy at a peak you will have to wait a long time to get your money back. Cars are not an investment. If you buy new as soon as you take it off the lot it loses some value. Houses can be an investment if you didn't buy during a peak. On the other hand if you are in an area where the carrying costs are very high it may be a wash. My MIL in NY just sold her home after 50 years. She made a great profit from what she bought it for "On Paper" but when you add in her $20,000 a year in property taxes, all of the maintenance, homeowner's insurance, and all the bills on a big house for 50 years she didn't really come out ahead.
But still you have to offset that with what it would have cost her to rent a comparable house for 50 years.
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Old 08-23-2018, 02:28 PM
 
Location: Las Vegas
13,447 posts, read 24,247,153 times
Reputation: 24784
I ask myself, do I NEED this? The answer is usually no!
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Old 08-23-2018, 03:13 PM
Status: "The weather is beautiful:)" (set 1 day ago)
 
Location: Where the sun likes to shine!!
20,369 posts, read 25,524,356 times
Reputation: 87968
Quote:
Originally Posted by aslowdodge View Post
But still you have to offset that with what it would have cost her to rent a comparable house for 50 years.


Sure but less headache, no worries about maintenance, no insurances. I get what you are saying but I'm not so sure anymore that homeownership is all that great anymore. It also ties you down to one place. I am kind of like a gypsy and while I do own my house I could easily rent or travel.
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Old 08-23-2018, 03:31 PM
 
Location: Gilbert, AZ
3,003 posts, read 1,702,910 times
Reputation: 2945
Quote:
Originally Posted by JonathanLB View Post
Iím not sure how anyone could argue that homes donít generally appreciate unless theyíre just trolling. Houses are way more expensive than they were 30 years ago. Every place I have owned is now worth more than whenever I bought or sold it.

Yes homes appreciate, but they also have considerable carrying costs. Making a profit after considering all expenses is hardly a slam dunk even over decades, and most people do not keep good enough records to even know if they came out ahead. Over 30 years I would wager most houses have more money sunk into remodel/replace items than the original purchase price.
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