Are you okay with renting or do you get sad about it sometimes? (apartments, leases)
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Right. But these are all variables that factor in.
Right now, I'm not sure I'm going to be in the same place for the next 5-7 years, so I'm not buying yet, but I have my eye open.
What I think is funny is that most people are uneducated about the home buying process and just kind of assume that buying a house is free rent and renting is just throwing away $.
Obviously, it's nowhere near that extreme.
I view it as a long term investment.
The idea is that I pay my house off in 15-30 years, whatever your repayment terms are. As I approach retirement, the idea is that I'll have no mortgage payment on my fixed retirement income. And while I'll still have property insurance, property taxes, HOA, and utilities, it will be only a fraction of what I'd be paying with a principal + interest payment, or a marked up rent payment for that matter. We're talking ~$600/mo vs. ~$2000/mo. or more depending on where you live and what the rental market is like by the time you retire. That's just a rough estimate; don't quote me on it.
Home ownership does not equate to free rent. However, it does open you up to the possibility of eliminating a major bill in your retirement years. After all, you will always need a place to live. Do you want, or will you have the ability, to pay for that bill during your retirement years without needing to work a job for supplemental income?
while that is true you will always need a place to live , the wild card is will that place to live be where you want to live .
the good thing about inflation is it makes your mortgage less meaningful decades later . the bad thing about inflation is it makes your mortgage less meaningful decades later.
that paid off 30-35k mortgage many of us had in the 70's does not represent much today when taxes are 12-18k on that house and other expenses sky rocketed .
many in the tristate area thought that their housing costs would be minimal 30 years later after the mortgage was paid .
well today that retired mortgage payment can't even pay the utility bill . so housing is no more affordable with a paid off mortgage , they still can't afford to live here
while that is true you will always need a place to live , the wild card is will that place to live be where you want to live .
the good thing about inflation is it makes your mortgage less meaningful decades later . the bad thing about inflation is it makes your mortgage less meaningful decades later.
that paid off 30-35k mortgage many of us had in the 70's does not represent much today when taxes are 12-18k on that house and other expenses sky rocketed .
many in the tristate area thought that their housing costs would be minimal 30 years later after the mortgage was paid .
well today that retired mortgage payment can't even pay the utility bill . so housing is no more affordable with a paid off mortgage , they still can't afford to live here
Fair enough.
Generally speaking, many people downsize in retirement, going from a larger SFH, to something like a condo, townhome, or duplex; which is generally much cheaper than the SFH they likely just sold. A lot of them also move somewhere that is more of an affordable retirement haven. The Sun Belt comes to mind. Heck, some even move to Latin America due to COL and climate. I live in CO, which is somewhat of a property tax safe haven, since they are lower relative to other parts of the country. The quality of life here is pretty good, too.
And while you may have an utility bill that is as much as your mortgage used to be (or more), it's economically more advantageous than having that utility bill on top of the mortgage or rent payment. If you can't afford one, then you definitely can't afford both.
All I'm saying is that the goal is to eliminate one bill; generally the largest bill you have. It's not to say that there aren't other bills that will amount to the same eventually. However, I'm in the category that it's better than having both bills on a fixed income. Most places in the US aren't going to see hyper inflated prices over 30-40 years like that of Silicon Valley, NYC, or LA. My utility bill has been $60-$100 (depending on season) for the better part of the last 15 years. So what if it's $150-200/mo by the time I retire. It's still cheaper than a $1350/mo mortgage payment that I have now.
Last edited by Sir Quotes A Lot; 12-12-2018 at 12:38 PM..
All I'm saying is that the goal is to eliminate one bill; generally the largest bill you have. It's not to say that there aren't other bills you will amount to the same eventually.
I used to feel the same way as you on this. We are doing well and should have our mortgage paid off in a few more years. Saving more in retirement accts than most, thinking maybe we'll even retire early. My wife is self employed. Her monthly healthcare insurance(41/healthy/nonsmoker) is approaching the monthly mortgage payment. I'm terrified for how much of our savings/retirement $ will be spent on healthcare. Mortgage payments might not be the largest bill a lot of folks have say 15 yrs into a mortgage, 15 yrs from now.
I used to feel the same way as you on this. We are doing well and should have our mortgage paid off in a few more years. Saving more in retirement accts than most, thinking maybe we'll even retire early. My wife is self employed. Her monthly healthcare insurance(41/healthy/nonsmoker) is approaching the monthly mortgage payment. I'm terrified for how much of our savings/retirement $ will be spent on healthcare. Mortgage payments might not be the largest bill a lot of folks have say 15 yrs into a mortgage, 15 yrs from now.
Right. But that doesn't negate the fact that on top of your insurance premium, you won't also have a large rent/mortgage payment. That's a HUGE savings right there.
the mortgage is lower but u have gas and water bill and cost of unexpected repairs
You pay those when you rent too. Either separately are included in (added on top of) rent). No landlord is losing money on a rental to cover the utilities, taxes, etc. on the place.
Just generally ... if real estate as an investment vehicle was so simple as you say, then everybody would be out of the stock market, and other investments, and just plop down 50K (which I do have) on a property for a downpayment and ... "Hey, free $, people are just paying my mortgage off for me, and then I have a free place."
Obviously, it is not that easy.
Your property value could go down, the tenants could wreck the place, you could have trouble renting the place, you could have tenants who don't pay rent, and good luck going after $ from people like that.
Also, realtor fees when you sell your place. Investing in real estate represents a risk just like everything else. If you buy the right place at the right time, of course it looks good. If you put all your $ into Amazon in 2009, you're also at the right place at the right time.
Like I said, if you are looking to live in a place for over 5-7 years, it represents a good idea. If it's less than that, then maybe not.
I'm not even talking about selling. That you will almost certainly gain unless you sell quickly and during the few years since purchase the value went down for some reason.
There is no guarantee, but the generalized 'it's often better to rent' or 'you don't save as much owning as you think' is complete nonsense.
Generally speaking, many people downsize in retirement, going from a larger SFH, to something like a condo, townhome, or duplex; which is generally much cheaper than the SFH they likely just sold. A lot of them also move somewhere that is more of an affordable retirement haven. The Sun Belt comes to mind. Heck, some even move to Latin America due to COL and climate. I live in CO, which is somewhat of a property tax safe haven, since they are lower relative to other parts of the country. The quality of life here is pretty good, too.
And while you may have an utility bill that is as much as your mortgage used to be (or more), it's economically more advantageous than having that utility bill on top of the mortgage or rent payment. If you can't afford one, then you definitely can't afford both.
All I'm saying is that the goal is to eliminate one bill; generally the largest bill you have. It's not to say that there aren't other bills that will amount to the same eventually. However, I'm in the category that it's better than having both bills on a fixed income. Most places in the US aren't going to see hyper inflated prices over 30-40 years like that of Silicon Valley, NYC, or LA. My utility bill has been $60-$100 (depending on season) for the better part of the last 15 years. So what if it's $150-200/mo by the time I retire. It's still cheaper than a $1350/mo mortgage payment that I have now.
we had the opposite happen . in nyc we have a 2 bedroom 2 bath apartment which we rent in a luxury hi-rise. at this stage it is just my wife and i .
but we bought a 2nd home in the poconos which we thought we would retire to .
however , now we needed a 3000 sq ft house because there , every one stays over . we are 8 adults and 6 grand kids .
so that too can work out very different . our housing costs actually went up because of this factor..
I'm not even talking about selling. That you will almost certainly gain unless you sell quickly and during the few years since purchase the value went down for some reason.
There is no guarantee, but the generalized 'it's often better to rent' or 'you don't save as much owning as you think' is complete nonsense.
With principal, interest, and HOA, I pay about $1500 on my home each month. It's over 1,800 sq ft.
With the rental market as it is, I could probably rent it for a little over $2k/mo. And that's not including pet rent, pet deposit, etc. Because of the local rental market, and lack of affordable rentals out there, I'm actually saving money each month by paying to own.
By the way, I have run the numbers in the scenario that you can walk into the bank and plop down a bag of cash and buy an apartment straight up for $250K.
Even THEN, you're not saving as much $ as you might think after property taxes and maintenance fees, utilities, etc.
Would that be a 'good idea' as opposed to renting? Of course. But still...
How much money do I think I'm saving? When's the break-even point?
Yet again, all that stuff is covered by the rent that you are paying if you don't own. You are most certainly saving a ton if you pay cash for a place, and then sell it for that much (or most likely much more) years later.
Yes, absolutely, if you buy today and sell in a year, you probably aren't going to come out ahead. But we aren't talking about unreasonably short-term purchases. We are talking about people who rent endlessly thinking they are coming out ahead or about even.
Even if everything else was even, once the mortgage is paid, your housing cost just dropped dramatically (after years of staying the same). You, still out there renting, have had your rent go up and it will never stop. That alone makes owning long-term cheaper. Then, on top of all that, whether or not the mortgage is paid off, everything you paid you get back when you sell. You will never see a penny you paid in rent ever again in your life. Talk about being in the stock market instead.
Enough of these claims, show us your break down and calculations proving it's 'we aren't saving as much as we think'.
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