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Not sure its been mentioned, but the value of the home must also factor in the local job market/pay/commute times. Housing is insane ...
I didn't see it in the search of 7 pages - looking for another topic.
Everyplace I have ever lived, workers attached a value of about $100k of house is worth about $10-20k ( per annum ) of extra commute cost. No wonder no one saves for their own retirement. They are too busy overspending on their house ( and other stuff ).
One way is via a tremendous amount of unsecured debt. The following is a hypothetical example - one that in the real world is extremely unlikely.
House fair market value: $500K
Mortgage on house: Zero. no mortgage.
Other assets: Zero.
Credit card debt: $499,800.00
Total of all assets: $500K
Total of all liabilities: $499,800
Net worth (total assets - total liabilities): $200.00
Credit card companies wouldn't extend $499,800 worth of credit to someone with that low of a net worth, so that moves this example from "extremely unlikely" to "impossible."
However, it would be possible to reach a net worth this low even with a paid off house with other types of loans, such as student loans, car loans, etc.
If buy a house and never move to a bigger house and get a bigger mortgage, you would own your home after 30 years if you got a 30-year mortgage. If you were smart, you would get a 15 or 10-year mortgage, pay it off as soon as possible--and then you own the house free and clear. Except....
Unfortunately, our insatiable, greedy government has a protection racket going, and charges "property taxes" (ostensibly for all the public services and facilities it provides). Even if you never have kids, and your local government makes you pay for your own trash pickup and disposal (like me in Exeter, NH), and the road system was paid for long ago, and you basically get nothing in return, your property taxes will continue to increase every year, until they cost just as much as your mortgage did.
With Big Government ruling on behalf of itself and the very rich, the average citizen cannot win.
If buy a house and never move to a bigger house and get a bigger mortgage, you would own your home after 30 years if you got a 30-year mortgage. If you were smart, you would get a 15 or 10-year mortgage, pay it off as soon as possible--and then you own the house free and clear. Except....
Unfortunately, our insatiable, greedy government has a protection racket going, and charges "property taxes" (ostensibly for all the public services and facilities it provides). Even if you never have kids, and your local government makes you pay for your own trash pickup and disposal (like me in Exeter, NH), and the road system was paid for long ago, and you basically get nothing in return, your property taxes will continue to increase every year, until they cost just as much as your mortgage did.
With Big Government ruling on behalf of itself and the very rich, the average citizen cannot win.
Actually I was trying to educate this person. A more realistic scenario would be someone with a $80,000 paid off house and two luxury car loans and a couple of skidoo and waverunner loans and maybe $20,000 in credit card debt.
If a typical house can last so much longer than a typical generation time (~30 years), and the typical mortgage term of 30 years, then why isn't it more common for the average Joe to own a home outright?
This economic question is simple: In olden times the firstborn son would inherit the parents home when his father died but the additional children got nothing.
Nowadays we consider that to be unfair to female children as well as later born males and most parents divide their estate, including the home, to all their children. And in prosperous economies the goal of most adults is to have home of their own that they can afford to buy with their own money.
We are also a longer-lived and mobile society so most adult children don't want to move into their parents home at the age of 65+. When lifespans were shorter the father might die in his 40's and the son would still be living (probably married with children) in his parents home and just take over, providing support for the surviving mother.
In Europe it's normal even today for several generations to live in the same house and this is starting to be true in the US for some families whose younger generation can't afford a home of their own.
Mortgage durations have gotten longer to make the payments smaller. It used to be that people put 50% down and took out a 7-year balloon loan to pay off the rest. The typical mortgage in the 50's and 60's was of 20-year duration.
The house is really only paid off once, not many times. The house changes hands many times, and the mortgage is paid off during the transfer. It starts when the builder sells the home and pays off the construction loan, while the buyer takes out a mortgage. The loans keep getting paid off each time the house changes hands, but the house is already paid for. If the buyer defaults on the home, the ownership of the house is retained by the lender.
Mortgage durations have gotten longer to make the payments smaller. It used to be that people put 50% down and took out a 7-year balloon loan to pay off the rest. The typical mortgage in the 50's and 60's was of 20-year duration.
The house is really only paid off once, not many times. The house changes hands many times, and the mortgage is paid off during the transfer. It starts when the builder sells the home and pays off the construction loan, while the buyer takes out a mortgage. The loans keep getting paid off each time the house changes hands, but the house is already paid for. If the buyer defaults on the home, the ownership of the house is retained by the lender.
You can still do that since houses are so cheap in much of the country. How much is a house everywhere else except the Bay Area, Nyc, Seattle, la, or dc? 200,000? Thats a steal!
I'm left wondering if this is OP's homework assignment, or maybe a question on an open book final. It's not like this question is hard to figure out, but it is easier to get someone else to do your work for you... hey, a progressive. Reap the rewards while someone else does the work.
I'm left wondering if this is OP's homework assignment, or maybe a question on an open book final. It's not like this question is hard to figure out, but it is easier to get someone else to do your work for you... hey, a progressive. Reap the rewards while someone else does the work.
Well, I could simply tell you that it is not, but since you might not believe me, you could simply note that it is summer, and even if this were a problem from a take home final, and despite the fact that I am physics grad student and have been saying so for many years, and despite the fact that my institution has few courses for the entire summer term as opposed to summer I/ii, you can be virtually guaranteed that anything you say after the fall begins could not be used to cheat. Or you could simply believe me, that it is not a homework or take-home problem.
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