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This whole mortgage mess has me scared.
I was already on the road of "No mortgage" for me because I've seen all the things people have had to pay for when something goes wrong with their home.
The housing prices in my state are relatively cheap comapred to other places but I still don't want a huge mortgage.
Some people argue renting is "throwing your money away" but we all need a place to stay so...oh well, my money goes to someone else. No different than a car payment, payment for food, etc.
It seems a lot of people want their houses to bring them wealth but I just want a place to stay. I don't want for much. I could care less about granite counter tops and stainless steel appliances.
Some argue if you don't have a mortgage, at least have money in the stock market but even that has me somewhat worried.
I think if you dont overpay for a house, and can get one for almost as much as rent, your better going that route. If you bought a house for living in for quite a long time and not as an investment, you should be fine. One day the market WILL turn around, and you may make a bit of money. Of course the chances of you making any money at all, have to do with what you pay, and most of all if it is a highly popular area. Are there jobs around? Is it in the boonies where no one really wants to live?
Nowadays you have to be very wise and careful before buying a house.
This whole mortgage mess has me scared.
I was already on the road of "No mortgage" for me because I've seen all the things people have had to pay for when something goes wrong with their home.
The housing prices in my state are relatively cheap comapred to other places but I still don't want a huge mortgage.
Is renting really throwing your money away?
No, I don't know that I would want to rent my whole life, but it makes a lot of sense for a lot of situations, this coming from someone who bought a house. The thing that drives me crazy more than anything is the notion that buying a home is an "investment." Unless you pay 100% cash, it is not an investment, for the average person who puts 10-20% down, they will pay far more in interest than they will ever gain in appreciation. On top of that, the whole mortgage mess we are in is due in large part to people who should've remained renters longers and saved some money instead of getting ripped off w/bad loans.
So if you are content renting, then don't let people tell you otherwise. Now I would rent the smallest, cheapest, yet still in a safe neighborhood place I could find. This of course varies on your area of the country. A couple disadvantages are you are at the mercy of your landlord to fix things, most places your rent will typically escalate over the years - where your house payment on a traditional loan will be the same over the duration. Bottom line, I think unless you are set on being in a city and staying in a given house for at least 7-10 years, you are probably better off renting, or unless you can pay 100% down and still have a decent size emergency fund available - unfortunately, the minority have this type of wealth available.
. WHAT? I think you either mistyped something or badly misunderstand what a down payment it.
Even if you really intended to say "never have a mortgage, always pay cash" this too is wrong headed advice for just about everyone. Housing prices will not continue to decline forever, there are almost certainly some houses that have fallen to prices BELOW their replacement cost -- the materials and labor in them are worth more than the selling price. How could it make sense not to borrow even a little to own such a property?
I think renting vs investing in a mortgage is different for each person or family. Where the problem comes in is when people feel pressured to get into a mortgage situation because everyone tells them that they need to be buying. It's NOT the American Dream if they can't afford a home and will ultimately lose it or struggle financially for years trying to keep it.
I sold the home I had in Jacksonville and decided that as a single woman with no kids living at home anymore....I didn't want the hassle of having to upkeep another home or paying for repairs. I would rather rent and leave peacefully. If I find I can't afford one place, then I can easily move to a cheaper place. So this was my decision....but it certainly isn't the right decision for everyone.
I was with you all the way to this. WHAT? I think you either mistyped something or badly misunderstand what a down payment it.
Even if you really intended to say "never have a mortgage, always pay cash" this too is wrong headed advice for just about everyone. Housing prices will not continue to decline forever, there are almost certainly some houses that have fallen to prices BELOW their replacement cost -- the materials and labor in them are worth more than the selling price. How could it make sense not to borrow even a little to own such a property?
I was speaking on the basis of a house being an investment, if you paid cash and didn't take out a mortgage, this is the only true way it can be - or putting down a considerable amount, say around >75% - considered an investment (definition: the investing of money or capital in order to gain profitable returns). My point being if you buy a $250k house and put 20% down or $50k, say you have a loan for $200k at 6%. The first year you will pay roughly $12k in interest, and w/out doing an amortization schedule, you'd pay roughly $50 - $55k in interest the first 5 years alone. While there was a short period of time this decade that your house might appreciate from $250k to $300k+ in 5 years, historically it won't appreciate that fast. And that would be to just break even. My point is, in most cases, a home is not an investment, the interest the typical borrower will pay on their loan (not to mention all the selling costs such as realtor fees, etc.) will far outweigh any appreciation most homeowners will have.
I was speaking on the basis of a house being an investment, if you paid cash and didn't take out a mortgage, this is the only true way it can be - or putting down a considerable amount, say around >75% - considered an investment (definition: the investing of money or capital in order to gain profitable returns). My point being if you buy a $250k house and put 20% down or $50k, say you have a loan for $200k at 6%. The first year you will pay roughly $12k in interest, and w/out doing an amortization schedule, you'd pay roughly $50 - $55k in interest the first 5 years alone. While there was a short period of time this decade that your house might appreciate from $250k to $300k+ in 5 years, historically it won't appreciate that fast. And that would be to just break even. My point is, in most cases, a home is not an investment, the interest the typical borrower will pay on their loan (not to mention all the selling costs such as realtor fees, etc.) will far outweigh any appreciation most homeowners will have.
Damn, hate to agree with a buckeye...but I do agree.
If you really look at the interest you pay out of the monthly payment, its pretty insane. This is another of the reasons the housing bubble HAD to burst. Since most average people do not make enough to save a whole lot for a dwnpymnt, in the long run, this will be a godsend for people who could never really think of owning a house, and for people who do own a house and want to upgrade. I am good example. I have been looking at houses in our beautiful northern areas, but because tourists, and whoever else had a second home for summer up there, they can no longer afford them. So a house that was going for $200,000 a few years ago is down to $120-$130 and will probably go much lower. Now I may actually realize my dream of moving up there instead of just dreaming.
After this mess is over, a lot of people are really going to clean up!
Hmmmm....a buckeye in Columbia. I guess it does sound like Columbus.
I would agree that it is unlikely to see gains every greater than cumulative interest in all cases for any period of time, but I would argue that it is ENTIRELY possible to see gains larger than cumulative interest AND other improvements in MANY cases.
I have been involved in real estate for about four decades. In recent past there were periods were "buyers" could flip a house in under 3 months and see a gain of about $50K in certain markets. That is of course unsustainable. I saw as a big red flag and it prompted me to sell my income property.
On average, in the suburban Chicago market, most areas have made it possible to for homeowners to do purchase an existing house with slightly below average condition for a fair discount and then make cost efficient improvements and recoup more than the cost of these improvement AND their AFTER TAX borrowing costs in about a 5-7 year time frame. This is not an "iron clad" rule, but I do believe it will still work for many people.
People can generally spot "out of date" baths and kitchen pretty quickly, so those are the areas where an improvement/upgrade/freshening will pay off. Even in other LESS costly rooms like the BEDROOM and FAMILY ROOM out of date window treatments, linens, upholstery, home entertainment equipment (even the portable stuff that the homeowner will not leave behind) can and probably SHOULD be updated to capture a top tier selling price.
The current levels of excess inventory are adding a new dimension to the normal calculation, but I believe that in many /most areas, even accounting for the bubble, a home owner who "got in" before 03 or certainly 01 is probably in decent shape to still show a profit, especially if they used ultra-low intrest rates such as those available with many ARM products.
Assuming the "wheels don't come completely off" the whole economy I firmly believe that people will be able to own, live in, and eventually profit from their single family home in HIGH QUALITY neighborhoods with good access to schools, employment and safe recreational opportunities on a more historical normal time scale...
I would agree that it is unlikely to see gains every greater than cumulative interest in all cases for any period of time, but I would argue that it is ENTIRELY possible to see gains larger than cumulative interest AND other improvements in MANY cases.
I have been involved in real estate for about four decades. In recent past there were periods were "buyers" could flip a house in under 3 months and see a gain of about $50K in certain markets. That is of course unsustainable. I saw as a big red flag and it prompted me to sell my income property.
On average, in the suburban Chicago market, most areas have made it possible to for homeowners to do purchase an existing house with slightly below average condition for a fair discount and then make cost efficient improvements and recoup more than the cost of these improvement AND their AFTER TAX borrowing costs in about a 5-7 year time frame. This is not an "iron clad" rule, but I do believe it will still work for many people.
People can generally spot "out of date" baths and kitchen pretty quickly, so those are the areas where an improvement/upgrade/freshening will pay off. Even in other LESS costly rooms like the BEDROOM and FAMILY ROOM out of date window treatments, linens, upholstery, home entertainment equipment (even the portable stuff that the homeowner will not leave behind) can and probably SHOULD be updated to capture a top tier selling price.
The current levels of excess inventory are adding a new dimension to the normal calculation, but I believe that in many /most areas, even accounting for the bubble, a home owner who "got in" before 03 or certainly 01 is probably in decent shape to still show a profit, especially if they used ultra-low intrest rates such as those available with many ARM products.
Assuming the "wheels don't come completely off" the whole economy I firmly believe that people will be able to own, live in, and eventually profit from their single family home in HIGH QUALITY neighborhoods with good access to schools, employment and safe recreational opportunities on a more historical normal time scale...
I agree. The "high quality" neighborhoods, and your normal areas everyone is drawn to, will be fine. The other areas will be down for quite a while.
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