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Old 02-09-2018, 03:22 PM
10,519 posts, read 38,865,869 times
Reputation: 13006


the only people who can make an informed decision about your financial choices are you/spouse with the assistance of your accountant running the various cost/benefit scenarios.

What your accountant cannot quantify is the "value" of home ownership in your personal choices.

For some folk, doubtless that a no-mortgage primary residence is worth the expense to do so. It certainly has for me and Mrs Sun. We paid cash for our farm/ranch at an opportune time to lock in a very low acquisition cost for a residence, business opportunities, and lifestyle which we enjoy. So there's a lot more here than just a house ... we provide a lot of other aspects of our living situation here, the ability to raise most of our food, keep livestock/pets at home (dogs, horses, llamas, burros, etc), and raise field crops for sale. And I have several barns and a workshop on-site for my mechanical businesses and hobbies. If push came to shove ... I could put an airstrip in the "back forty" and keep my plane at home, too. I have plenty of room to store my boats, cars, motorcycles, farming equipment, and RV's. So there's more benefits in this place than simply a roof over our heads. Of course, there are trade-offs ... we're not conveniently located to shopping, entertainment, restaurants, or medical services.

For some folk, doubtless that a mortgage capturing an opportunity for the housing that you want is worth the expense.

For some folk, doubtless that home ownership is not worth the expense.

They all have their benefits, drawbacks, and costs applicable to each individual situation.

Choose what appeals to you, not what fits somebody else's scenario and preferences.
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Old 02-09-2018, 03:24 PM
631 posts, read 228,481 times
Reputation: 1469
Gosh, it really depends on the market and individual circumstances. Personally I like having a mortgage compared to cash for property because my cash grows faster in other assets in terms of investment. But you have to live somewhere. And rates are still really good.
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Old 02-09-2018, 03:47 PM
1,288 posts, read 591,155 times
Reputation: 902
But under 200k, it is unlikely to save a couple on their income taxes...the standard deduction is more than interest. And even at 3-500k you would only save on the amount greater than the standard deduction, and even that may be on the endangered list.
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Old 02-09-2018, 04:50 PM
7,696 posts, read 6,592,001 times
Reputation: 16403
Originally Posted by just_because View Post
Let's look at 3 scenarios:

-if you own outright (no mortgage), you 'pay' for tying that money up in a property rather than in bonds or the bank (or stocks) - you expect to be no worse off than tying up that money at the current cost of borrowing.

If you are living in an area of the country, where homes are increasing in value, your increase in value is the interest you are getting for your money invested in the home. Here in Montana we did not have the big crash in value places such as California and Florida had in the last melt down. The last few years, there has been a 10% to 12% per year increase in value. As our home is owned Free and Clear, we are getting a 10% plus interest rate on our money. That is a lot better than what we could get from the bank. As someone that my wife were both real estate investment brokers starting in 1972, working with a stable of investors until we finally retired we know where we stand real estate investment wise. Our total;
housing expenses including insurance, taxes, maintenance, yard care with our equipment, a housekeeper 3 days a week, is less than we could rent a decent apartment for. Our home is a 3,700 sq. ft. 4 level (not 4 story) custom contemporary home fixed up for elderly people with things like 3 chairlifts to get between the different levels.

-if you own and have a mortgage, you pay the bank for use of their funds (tied to the going cost of borrowing)

On the other hand, if you have a mortgage, you are allowing yourself to get into a home long before you could if you were saving up cash to buy one, and start converting a lot of that mortgage payment into equity. And what would be rental payment, can be deducted from your annual cost in bookkeeping, and combine any increase or decrease in value in your analysis. Any good investment counselor, can show you that it is cheaper to rent a home than buy one with a mortgage in the short term. To know if a home is a good financial investment requires a thorough analysis. At today's low interest rate, it is very favorable to buy a home with a mortgage.

-if you rent, your landlord has capital tied up in the property and expects to get a return equal to the cost of borrowing plus his risk premium. So indirectly, you pay for the cost of his capital.

The investor invests in real estate, to make a long term return on his investment. He/She, are looking for a Total Return On Their Dollars, which is evaluated by: The Investors return on Cash Flow, Investors return on Tax Benefits from owning that parcel of real estate, Investors turn on Appreciation, And Investors return on Amortization. The rental value increase/decrease in the area among other factors, effects the Total Return On Invested Dollars.

In other words, the difference between these three scenarios is not as great as everyone may believe. Yes, there is a difference and you need to do the math but conceptually, they all follow similar rules in that they are tied to some degree to interest/borrowing rates.

Owning Free and Clear, vs. buying with a mortgage, vs. Renting, all have their advantages and disadvantages, and only you can determine which is best for you under your current abilities, how long you plan on living in the home or apartment, and your personal future potential. Interest and borrowing rates, are a very small factor today with the low interest rates at the present time.
If you are in an area where homes are appreciating rapidly, it can be very much your advantage of locking in today's prices, while if you wait for a few years to save up a lot more money, you can actually be priced out of the real estate market. Example: We owned 4 different homes, in Cupertino Ca. Saratoga Ca, etc. Homes we bought for $13,750 that was a tear down 10 years ago at $850,000, and 1 bought for $18,000, and and one for $20,000 that 50 years later, are reselling for $1,250,000, and one at $22,000 that today would go for about $1,450,000. If I had kept those 4 homes, what I paid less than $75,000 would today be worth Millions of Dollars. Even people that bought just before the recent crash, are back in the black again in the same area.

There are many factors that have to be taken into consideration when you make your plans, as to wait for years till you can pay cash, buy on a mortgage today, or you rent. The thing you have to do, is sit down and do a real analysis of what is best for you, and act on that. If you are planning on living in the home for less than 5 years, it is always wise to rent rather than role the dice and put yourself at risk. Home ownership is a long term investment, not a short term investment medium. Short term it is a gamble not an investment.
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Old 02-09-2018, 04:59 PM
50 posts, read 13,997 times
Reputation: 19
I think you also need to consider the real estate market in the area your interested in. What has the pricing history been over the last 5-10-20 years? If you wait and the prices go up then you already know the answer. I also think it's a safe bet that in the long run the value of real estate, in most markets, will only appreciate. As for a mortgage I would be considering what interest rate is available at the time. I paid $197K for my first home in 1997, today it's valued between $800-900K. My parents home was purchased in 1968 for $14K, today thanks to the ZIP code its worth about $1.1 million.
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Old 02-09-2018, 05:48 PM
Location: Castle Rock, CO
178 posts, read 82,920 times
Reputation: 319
If you make 135k, and you find a 160k mortgage "oppressive," you're doing something very very wrong with your finances (particularly since you say you don't have any debt in another one of your posts).

IMO I'd buy the house now, lock in a low interest rate (15 yr would probably work for you), and focus on paying that down + putting more money into retirement/ savings. You can always pay the house off early.
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Old 02-09-2018, 06:34 PM
Location: East Coast
2,124 posts, read 1,165,254 times
Reputation: 2933
A 180K mortgage would likely be less than what you're paying for rent. And you'll build equity plus enjoy the appreciation of the property value (which is not guaranteed, but is likely).
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Old 02-09-2018, 06:45 PM
Location: Florida -
7,719 posts, read 9,070,383 times
Reputation: 13132
Of course it's not incredibly stupid, but, it depends on your market .. and your financial condition and monthly cash flow situation as to whether a cash purchase makes sense. The latter feels tremendously freeing --- and in some markets, people are paying full cash ABOVE the asking price.

The notion that a mortgage at today's low interest rates is always the best option (using someone else's money) -- is often less important than being mortgage-free. (For example, if you are in a tenuous job market or have other personal financial issues where the money could be used to reduce other higher interest debt).
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Old 02-09-2018, 07:22 PM
Location: San Antonio
2,968 posts, read 8,532,475 times
Reputation: 4144
In 10 years you will pay $144,000 in rent... WOW. That money could just be applied to the home you own and you could be gaining equity vs letting someone else get rich off of your rent. You could pay $144,000 towards your own house, or give it to your landlord. I know what I would do....
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Old 02-09-2018, 09:23 PM
Location: Western Washington
6,638 posts, read 6,623,327 times
Reputation: 11107
Using a mortgage calculator, it looks like your monthly mortgage on a 30 year note would be about $850/month. That doesn’t include land taxes and insurance of course, nor does it include repairs. If those items come to $600/month, your total payment would be $1450.

Is owning vs renting worth $250/month, aka $3,000 a year? If you consider the fact that your home price is likely to appreciate by 3% annually, that would be an annual appreciation of $7,000. To be complete, I guess you need to offset any investment gains your $45k would get you.

Purchasing doesn’t sound unreasonable to me.
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