How do you justify paying 100’s of thousands just in mortgage interest? (foreclosures, fees)

[little pink]

If you add up the cost of taxes, maintenance, and insurance (with a reasonable amount of buffer room for maintenance), you'd save at the very minimum 70-80% of your total cost of housing per month. So basically, you can work a minimum wage job and not lose your home. Whereas if you rent, that most likely won't work.


Funny you said that, I recall reading about a guy that paid off his modest rancher home. He said that he will now quit his stressful job and work flipping burgers to earn just enough to pay the utilities and such. I have no mortgage and a modest home , this is the key to financial peace . My ex has a half million dollar home with 1800 / a month mortgage payment , who do you think sleeps better at night?

Just as the rich rule the poor,
so the borrower is servant to the lender.

[jencam]

Originally Posted by TimtheGuy

"you don't really own anything" when you buy a house???

That poster said with a mortgage. On forms I always have to put that that I own, but I say to myself the bank owns my home until I am done with the payments.

[MikeJaquish]

Originally Posted by jencam

That poster said with a mortgage. On forms I always have to put that that I own, but I say to myself the bank owns my home until I am done with the payments.

I know you are speaking colloquially, but it is an interesting topic.

The mortgage is an encumbrance on the title the owner holds.
A deed of trust, an instrument used in many states, conveys legal title to a third party trustee under strict legal stipulations as long as there is a mortgage lien. Meanwhile, the owner holds equitable title, with protections under those strict legal stipulations that are unique to real estate ownership.

Unquestionably, I own my home. I have a deed that says I do. I would never say "The bank owns it."
And, I have a contract conveying equitable title, specifying terms under which I can claim legal title.
That contract states the terms under which the trustee is compelled to transfer legal title.

Even if I owe 100%+ of market value, my equitable title to the property is assured as long as I meet those contract requirements.
Equitable title and laws and contracts support my ownership of any financial equity and claim to possession and enjoyment of the property.
If you have paid your PITI, you own any accrued financial equity, whether accrued by dint of amortization, appreciation, or improvement to the property.

Buy at $200,000 with 20% down. Pay the $160,000 note balance down to $100,000.
Assume $50,000 appreciation in market value. You own $150,000 in equity that mortgage holder or deed of trust trustee cannot arbitrarily take from you.
Pay off 100% of the note balance, and the trustee MUST convey legal title immediately.

Equitable title under state laws and contract stipulations in real estate comprise the machinery that makes our markets work.

[carnivalday]

Landlords are not in the business to lose money. So you dont want to own because of property taxes? Who do you think is paying those? Yes, the renter is paying them. Its part of your rent.

Rent for 30 years, then the landlord decides to sell the house. You have to move with zero in your pocket. And landlord/homeowner moves with a huge chunk of change in his pocket. Mr. Renter paid off his house, thank you very much.

My mortgage is nearly paid off. The payment is $600 a month. I couldnt rent anything around here at that price that Id want to live in. When its paid off, Ill have an asset worth mid 6 figures. Had I rented all this time, Id still be shelling out over $1000 a month just to have some place to live that I could be booted out with a months notice. No thanks. I like controlling my own destiny.

[frankrj]

"We’ve been doing some mortgage interest calculations, and it turns out that on a 250k home, we will pay over $100k in interest at 3.75% over 30yr years. Call me crazy, but I just cannot justify that."

current rent: $1100/mo
$1100 x 360 months (30 yrs ) = $396,000 you paid in rent.

In 30 years your home is free & clear and you have $300,00 to $400,000 of real estate after paying a total of $343,739 + property taxes and insurance, and upkeep maintenance. Let's add $400/month for 30 years, Or another $144,000
Grand Total = $487,000

So you will have paid $91,000 more for your own place and equity.

Oh, let's not forget the property tax write-offs. And the potential AirBnB's winter renting.No landlord, so it's your decision to rent to someone for a month or two in high season.
You can always prepay your mortgage in less year to pay less in interest.
All of this is speculation of course.

Or IF renting for 30 yrs, hopefully you make the same salary, have dividend paying investments, you have gained no equity.
And we both know on the gulf coast with all the development going on the price of the home should be worth $300K+.

Use the NY Times interactive calculator for a unbiased opinion, NOT Zillow or Realtor dot com.

[trobesmom]

Originally Posted by airics

You could have gotten the 30yr and just paid the 15yr amount. The interest isn't that much different.

You could pay it off even quicker if you paid additional principal every month. I forget what the amount it, but it wasn't much extra per month.

[kettlepot]

Originally Posted by Wilson513

When you pay rent you are paying a landlord for the use of his asset. an apartment worth $250k for example.

When you borrow $250k you are paying the bank for the use of their asset, i.e. $250k of cash.

Do you think there is a difference?

I like this shorthand answer best. I really gets to the heart of the discussion.

However, I would add that the landlord can keep charging more each year for the use of his asset, while the bank can't.

The big economic judgement to be made is the guesstimated rate of inflation over the term of the mortgage, and the rate of appreciation (or not) of the house.

Buying a house in Detroit 30 years ago was a losing proposition. Buying a house in the SF Bay Area was a winning proposition, 10x over.

[boxus]

Originally Posted by louie0406

We’ve been doing some mortgage interest calculations, and it turns out that on a 250k home, we will pay over $100k in interest at 3.75% over 30yr years. Call me crazy, but I just cannot justify that. Is there something that I’m just not understanding? On top of that, you’re on the hook for taxes, insurance and basic maintenance and repairs of your home.

But you justify dumping $1100/mth rent, in which after 30 year you will still own nothing, not even have a slightest hint of equity in anything?

Originally Posted by louie0406

The only benefit that I can see from owning a home is that you have more private space and nobody can evict you (unless you stop mortgage or tax payments). Other than that, I dont see the upside.

Aside from being one of the foundations of building wealth, yea, not much upside in owning property, lol.

Originally Posted by louie0406

I see the argument all the time of how “you’re just throwing money away by renting as you build no equity and are just lining someone else’s pockets”. Well aren’t you lining the pocket of these banks buy paying an exhorbanant amount of interest over the years?

I rather line the bank's pockets and at the same time build my wealth, than just dump endlessly to a landlord with zero return on my part. There is a good chance that landlord is paying still on the home, all you are doing is still paying his/her mortgage, and adding a little for profit for the landlord. Even if the landlord owns free and clear the property, you are still paying a market rate which will be set by the property value, which will be related to the what a lender will provide (I own two properties free and clear that I rent out).

Originally Posted by louie0406

Why shouldn’t I just keep my $50k (20%) down payment in the bank and continue to save and invest while paying an affordable rent instead of locking myself into a long term loan paying an insane amount of interest?

Go ahead, but after that 30 years, you will still be paying rent all the while having zero equity in a home, instead of a home that most likely has increased in value over those 30 years, and oh yea, be mortgage free instead of continually renting.

Originally Posted by louie0406

Again, we are new too all of this and are just looking for some information on how buying a home rather than continuing to rent would be financially beneficial to us because I dont see it.

Thanks...

I was a renter for years, I even have posts on this forum similar to your post, but after I was given a home through an inheritance and rented it out, did I see the light and the stupidity of my advocating for renting (it is great only in very specific circumstances).

I bought another property to rent (no mortgage), and then bought the condo (mortgage) I lived in that I was renting for a long time. My wealth has increased greatly, my mortgage is lower than my rent was and is much lower than the rents in my building (Miami is on the high side of rental prices right now), lol, and it will not change like the wild rent swings do here in Miami. My mortgage including condo fee ended up being about $500 less a month than my rent.

Now I am looking to purchase a condo around the area to..guess what...to rent out.

I saw in another post you speak to maintenance and repairs; you have estimated the costs way too much, especially if you have any handyman skills. it will be rare and far and few between to have any major repairs needed. Even when they do occur, after 30 years you will be way, way ahead financially.

[Jlong2315]

Originally Posted by louie0406

While true, you’re not factoring in property tax that will continue to go up and never go away even after the home is paid off, along with home owners insurance.

The upkeep of your home can run in the 10’s of thousands over the course of your mortgage as well. Things like your roof, water heater, boiler, sidings, air condition unit, landscaping, etc that will need attention over the years. That $250k house can very well run you double that once all is said and done.

There are plenty of strategies you can use to keep your maintenance cost down. You could buy insurance to cover appliance etc. It's 35-50 a month. I buy things that need to be replaced over time in bulk, Filters etc. they You could also buy a new house and move every 5 years. The average mortgage really only lasts that long because people move often. your maintenance would be low because you just move before big repairs need to be made. I understand random things happen but most of the big expenses you have quite a while to prepare for. I personally just save money every month for house maintenance at this point I have not used any of it. After a few years you have quite a bit of money tucked away for repairs. my point is maintenance is really not that big of an expense.

[hellob]

You're just scared bc the mortgage calculator shows that big number so your brain is tripping over it. However, it's making you blind to the fact that you're going to be paying that amount either way.