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Old 01-18-2017, 07:53 AM
 
4,690 posts, read 10,339,311 times
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Quote:
Originally Posted by blisterpeanuts View Post
I disagree with this advice. The "idiots" (like me) who went with a fixed 30 year mortgage are the ones who still own their homes after 2009. The brilliant geniuses who went with an ARM got foreclosed, and can't buy a house again for 7 years because their credit is shot.

The best approach has always been, and continues to be, a 30 (or 15 if you can afford it) year fixed mortgage with the best possible rate you can lock in. Rates are rising, so if you get an ARM, thinking "no problem, I can always refinance to a fixed later) you will definitely pay more regardless whether your ARM resets or you get a fixed 4-5 years from now.

Me'h, I've owned house before and after 2009. ARM in 2009 didn't mean I was foreclosed on, because I wasn't. I do know a large number of people with a traditional 30 year that WERE forclosed upon through that time though, they were all "house poor" and couldn't manage the liability of owning a house/making those payments. It has nothing, ZERO, to do with the Type of loan.

Beyond that, when my current ARM does adjust (assuming I've been making minimum payments), it can only adjust at a maximum percentage per year... that's somewhere between 1 and 3%, and when it adjusts they also recalculate my payment based on the New balance due. At minimum monthly payments with maximum rate adjustment I'd be paying within $20 of the same payment I made for the first 10 years.

Too many people are Completely ignorant about other loan options. They buy into the narrative pushed by the banks (who make WAY more money on a 30 year fixed) and don't bother to sit down and actually run numbers to see what the Real difference is. I have to ask, have you Actually done the math? Honestly, no need to answer me/in public, just be honest with yourself. Or are you going with what you "believe" but haven't proven to be true? This isn't a faith thing, math is a hard science, you can see exact numbers. -

We will pay roughly $30,000 less to the bank in interest with a 10/1 ARM vs a 30 year fixed.

As I said, we were idiots with the first loan and have not made that mistake again. We basically gave the bank $10k for no reason other than our stupidity. Why would Anyone do that? Faster to cut out the middle man and just toss it on the grill and burn it if your goal is to lose money for no reason.

I'm *NOT* saying that an ARM is always the right option, or that it's the *ONLY* other option to a 30 year fixed (because it's neither), just that there are a Lot of options and if you want to make the most of your hard-earned dollar, you need to do the homework and run the numbers. It's pretty easy these days, there are a billion mortgage calculators online and probably even apps for phones.
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Old 01-18-2017, 08:34 AM
 
12,016 posts, read 12,624,709 times
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Quote:
Originally Posted by kickblocks View Post
I've lived in apartments all my life and it's worked out for me. I've moved around a bit because of work, either changing jobs or, frankly, losing them. And so I've always held off of buying a house. Obviously, I know the most basic "pro" of renting is that you have freedom of movement with no repercussions. So I told myself "wait until you're at the point in your life when you're in a secure job and then buy a house." Makes sense. But as the years have gone on, I've realized that's basically never. Sure, there are lots of people (most?) who just stay at their job for decades, but there's also the possibility of always losing your job even tomorrow for at least a large majority of people. So I chucked that out the window recently and decided I was going to buy a house. Good idea or bad idea? Here is my thinking.


Apartment living in and of itself doesn't bother me. I don't mind renting space. But I'm at the point in my life where I get aggravated hearing other people on the other side of a wall. Or hearing people walking around on my ceiling/their floor. I don't like having to smell people smoking. There's an area for recycling/trash and it aggravates me when people throw their garbage in the recycling bin -- not because I'm an eco-warrior, but because it's right next to the dumpster, which means they literally don't care what they're doing. I don't like having to find parking or having to share parking with people who will squeeze right up next to your car.


OK, so that sounds like I'm fed up. But is "fed up" a good enough reason to buy a house? My biggest "makes sense" reason is that I'd rather sink money into a monthly mortgage than into a monthly rent.


Most people I know were fairly positive about the idea of buying a house. But then I talked to a friend and he said don't do it. He made it seem like buying a house was the worst decision in the world, with huge upkeep and hidden costs, as well as property taxes. Essentially, he said there was almost no reason ever to buy a house (which is sort of drastic, but I guess is technically true, since anyone can rent always). So ...is buying a house crazy? Or crazy for me to do? Or makes sense?
The best thing I ever did was buy a house. I rented for over 20 years. I never thought I could afford a house and where I always rented I couldn't so I had to move to where I could afford a house. In 6 years of renting a modest 1 bedroom older apartment I spend over $50K in rent (there are towns in this country where you can buy a decent small home for $50K) . Now my mortgage costs a few hundred dollars less than what I was paying for rent, and it costs less than what I would have to pay to rent a room in someone's house. It's an older modest home but I have 3 bedrooms my master is large, but one bedroom is tiny and more of an office or guest room, but now I have a backyard for my dogs, don't have to go to the laundromat to do my wash and don't share any walls or floors of ceilings with anyone. I can also rent out a room and it would cover all of my mortgage payment.

Rents are only going to go up, mortgages basically stay the same, the only thing that goes up can be homeowner's insurance and taxes, but you can choose where to live and pick a place where taxes are low.

Also talk to homeowners not renters who are afraid to buy.

My biggest regret is not buying sooner. I moved to Florida in 2008 and that's just after the housing collapse so had I bought a year later I would have gotten a lower priced nicer home and would have already paid 7 years of the mortgage.

Housing wise the best thing was buying a home. The best thing I ever did was move to Florida location wise, the best thing I ever did personally was get adopt 2 dogs from the shelter. Now it's perfect, I have a home in SW Florida with a backyard for the dogs.

Last edited by LifeIsGood01; 01-18-2017 at 09:10 AM..
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Old 01-18-2017, 09:02 AM
 
6,738 posts, read 2,874,531 times
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I saw this in the newspaper this morning, thought I would pass it on;

What do economists think about buying vs renting a house?




Erik Brynjolfsson, Director, MIT Initiative on the Digital EocnomyWritten Feb 1, 2016 · Featured in Business Insider · Upvoted by Alex Tabarrok, Professor of Economics, George Mason University and Gennady Barsky, real estate mogul, CFO









Alex Tabarrok makes many good points but I would amend his answer a bit toward ownership for three reasons:
First, the right way to think of your asset portfolio is to include both liabilities and assets. Unless you plan to be homeless, you have a huge expected lifetime cost for housing. The neutral position is not to own zero housing, but to own the same amount of housing as you expect to consume. If you don't, you are in effect "shorting" housing and at risk if housing prices go up.
Second, there's a huge tax benefit to housing which comes from the hidden "dividend" it pays. I'm not talking (just) about the (too) generous mortgage deduction, but rather the fact that you don't have to pay taxes on the implicit rent you earn on your house since its paid to yourself. A house generates enormous rental value each month -- like a dividend. If you rent it to yourself, you take the money out of one pocket and pay it to the other one, and the IRS doesn't tax that. In contrast, if you earn money some other way and then use that money to pay rent, you probably also have to pay taxes. That can add up.
Last but not least, owning a house gives you "residual rights of control" to do what you want with it and that kind of ownership creates psychic rewards for many people and it's also a kind of forced savings that can pay off over the long term. You can paint it, remodel, put in a garden, invest in custom appliances, etc. Owners also often tend to feel more attached to the community. Most mortgages require you to make a monthly payment and for many people, that ends up being their biggest source of savings. Investing in something that gets better over time is something many humans get a lot of value from, aside from the narrow financial effects
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Old 01-18-2017, 09:02 AM
 
12,016 posts, read 12,624,709 times
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Quote:
Originally Posted by Pyewackette View Post
Where I live, renting a house the size of the one I currently live in is $1700 a month - up from $1300 a month when I first moved here 3 years ago. I am paying about $600 per month including taxes and insurance on my home that we bought 6 months ago.
Wow where is this, nor specifically, just what state or county or what part of a particular state if you don't mind saying.

Where my father lives in northeast NJ a 3/1 home rents for about $1700 but property taxes alone are about $500 a month so there is no way to buy a home and have a mortgage less than $1000 a month. I doubt you could even find a one bedroom or studio for $800 in a decent area.

I just checked online and there is a one bedroom available for about that cost but you have to earn $30K a year to qualify. I don't know about too many jobs paying $14.50 an hour, so I would think you need 2 incomes to qualify for that one bedroom.

Last edited by LifeIsGood01; 01-18-2017 at 09:17 AM..
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Old 01-18-2017, 12:18 PM
 
Location: California
1,424 posts, read 1,627,424 times
Reputation: 3144
Quote:
Originally Posted by blisterpeanuts View Post
I disagree with this advice. The "idiots" (like me) who went with a fixed 30 year mortgage are the ones who still own their homes after 2009. The brilliant geniuses who went with an ARM got foreclosed, and can't buy a house again for 7 years because their credit is shot.

The best approach has always been, and continues to be, a 30 (or 15 if you can afford it) year fixed mortgage with the best possible rate you can lock in. Rates are rising, so if you get an ARM, thinking "no problem, I can always refinance to a fixed later) you will definitely pay more regardless whether your ARM resets or you get a fixed 4-5 years from now.
I bought my house with a 30 year fixed 3.375% rate. They are now 4.25%
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Old 01-18-2017, 12:50 PM
 
Location: Huntsville
6,013 posts, read 6,592,064 times
Reputation: 7036
Quote:
Originally Posted by kickblocks View Post
I've lived in apartments all my life and it's worked out for me. I've moved around a bit because of work, either changing jobs or, frankly, losing them. And so I've always held off of buying a house. Obviously, I know the most basic "pro" of renting is that you have freedom of movement with no repercussions. So I told myself "wait until you're at the point in your life when you're in a secure job and then buy a house." Makes sense. But as the years have gone on, I've realized that's basically never. Sure, there are lots of people (most?) who just stay at their job for decades, but there's also the possibility of always losing your job even tomorrow for at least a large majority of people. So I chucked that out the window recently and decided I was going to buy a house. Good idea or bad idea? Here is my thinking.


Apartment living in and of itself doesn't bother me. I don't mind renting space. But I'm at the point in my life where I get aggravated hearing other people on the other side of a wall. Or hearing people walking around on my ceiling/their floor. I don't like having to smell people smoking. There's an area for recycling/trash and it aggravates me when people throw their garbage in the recycling bin -- not because I'm an eco-warrior, but because it's right next to the dumpster, which means they literally don't care what they're doing. I don't like having to find parking or having to share parking with people who will squeeze right up next to your car.


OK, so that sounds like I'm fed up. But is "fed up" a good enough reason to buy a house? My biggest "makes sense" reason is that I'd rather sink money into a monthly mortgage than into a monthly rent.


Most people I know were fairly positive about the idea of buying a house. But then I talked to a friend and he said don't do it. He made it seem like buying a house was the worst decision in the world, with huge upkeep and hidden costs, as well as property taxes. Essentially, he said there was almost no reason ever to buy a house (which is sort of drastic, but I guess is technically true, since anyone can rent always). So ...is buying a house crazy? Or crazy for me to do? Or makes sense?


Buying a house is a personal decision. You have to weigh the pros and cons. For me....


(Keep in mind we have no HOA and live in the country)


The space is mine to repaint, remodel, or do whatever I want to do with it.
The yard is mine to do whatever I want to do with it.
I don't have to worry about listening to people above, below, or right next to me at all hrs of the night.
I am investing money instead of throwing it away. If I want to leave, I sell the house and get at least some (if not all) of my money that I have spent back.

Any maintenance item is repaired at my cost. Since I do all my own repairs though I am only out materials.


But.... looking at it from a financial perspective for me it looks like this (the below is an example):

Frank spent $150k on his house and his payments were $1,000/month. He lived in the house for 5 years. In those 5 years he had to put $4,000 into the house for repairs. He's actually only spent $64,000 on the house when he decided to sell it at the end of the 5th year. (Mortgage payments plus maintenance) Let's say Frank only owed $135k on the house when he sold it. Since the property value has improved due to upgrades to the home and a market upswing he sells the house for $165k. He has spent $64k over the course of 5 years, but he recovers $30k of that in the sale. So his total cost of ownership was really $34k. That comes to about $472 per month.




Bob rented an apartment for 5 years. His rent (to include insurance) was $1,000 per month. His maintenance was covered in the rental agreement. At the end of the 5th year he moves out. Bob has spent $60k that he cannot recover. He now has to move onto the next apartment and spend more money.


If done correctly, the cost of owning a home can be much cheaper than rent, and if conditions are right you can actually make money owning a home. That isn't possible with a rental since a home can be an asset where-as a rental is an expense.


But YMMV as there are a lot of factors that play into it. At the end of the day, go with what feels like the best solution for you. It's a gamble either way.
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Old 01-18-2017, 12:50 PM
 
6,586 posts, read 5,829,589 times
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Quote:
Originally Posted by HappyinCali View Post
I bought my house with a 30 year fixed 3.375% rate. They are now 4.25%
Yup, I got a 30 year fixed at 3.125% just four months ago. Demand is rising, and under the new Administration it's a safe bet that more jobs are coming, hence even more demand, hence upward pressure on rates and on home prices. I would buy now and not wait.
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Old 01-18-2017, 01:03 PM
 
Location: Huntsville
6,013 posts, read 6,592,064 times
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Quote:
Originally Posted by blisterpeanuts View Post
Yup, I got a 30 year fixed at 3.125% just four months ago. Demand is rising, and under the new Administration it's a safe bet that more jobs are coming, hence even more demand, hence upward pressure on rates and on home prices. I would buy now and not wait.


My last house was 5.75% interest. We bought our current house in a very desirable neighborhood about $5k below current market (which is low in our area right now) and locked in a 30 year fixed rate at 3% flat. If the market improves we could potentially make a substantial amount of money from our home if we decided to sell it.


The house originally sold for $300k. We bought it at $265k. The neighbors are listing their home in the spring. Their house is the same size and comps to ours. Their Realtor told them that they anticipate to list the house in the spring at $280k as they are forecasting an upswing in our area since there is a new desirable shopping plaza going in a few miles away, a new school being built, and some new jobs opening up out in our area.


If it sells for $280k we "could" realize an additional $15k of value in our home. We could choose to refinance it and pull out that added equity if we got in a bind (we don't intend to) or if we ever do decide to sell and the market is similar we could profit from it.
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Old 01-18-2017, 05:52 PM
 
Location: Out there somewhere...a traveling man.
44,541 posts, read 61,208,520 times
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If you're renting you're paying for the landlords expenses in your rent. You're paying his ppty taxes, maintenance, yard work, etal. When you move out you get no investment benefit back. Owning you get tax benefits, appreciation benefits, possible higher credit rating, pride of ownership, many advantages.
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Old 01-18-2017, 06:22 PM
 
12,016 posts, read 12,624,709 times
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Quote:
Originally Posted by wit-nit View Post
If you're renting you're paying for the landlords expenses in your rent. You're paying his ppty taxes, maintenance, yard work, etal. When you move out you get no investment benefit back. Owning you get tax benefits, appreciation benefits, possible higher credit rating, pride of ownership, many advantages.
Yes, when you rent you pay for someone else to own the place, pay their mortgage and make a profit.
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