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You buy a home when you are 30 with a $1200 PITI payment for 30 years. You pay $432,000 for the house. So when you are 60, you only have the TI (taxes and insurance) part of that payment plus repairs. You also have something that you can sell or loan against if needed.
Let's assume for ease that rents are equal to home payments (in my city owning is cheaper right now). So lets say the landlord raises the rent just 1% a year for inflation. So for that same house you would pay in rent $500,772 plus your rental insurance payment for 30 years, let's just say $100 a year for ease. So that's $503,772 over 30 years. So the homeowner has saved $71,772 but a good chunk of that will be repairs over those years. So the homeowner will be a little bit ahead still, but not that much.
I won't even touch on the mortgage interest deduction that homeowners get that help to offset some of those costs. Paying less tax is considered a good thing by most people.
So at 60, the homeowner has a bit dated, but well maintained asset and the renter has nothing. This is where things really kick in for the homeowner because taxes, insurance, and repairs will not come close to rents at that point and so while the renter is paying market value for rent, the homeowner isn't. The chunk of your lower retirement income going toward shelter is considerably less.
So if you are a renter at age 70 and get really sick and can't pay your rent because your medical bills are piling up, you get to be homeless, be bounced around family, or whatever. If you are a homeowner, you can tap into that asset with a reverse mortgage and stay put.
American isn't obsessed with home ownership, but I will give you that our society is obsessed with large homes. When people live within their means, homeownership is a part of a good financial plan for long term financial health.
If you are someone that would move a lot, owning makes no sense because the costs of moving would eat into the $71k number very quickly and it would actually cost you more over time to own. So whether or not the math is in your favor depends on your lifestyle and job. There was a poster on this forum that was renting in San Fran for $375 a month. He should not buy a house. He can stash his money, invest it in something else, and when he is ready to retire pay cash for a house then.
I think the most important thing is to plan to outright own a place when you are older, so that you have some security for yourself if something happens. I mean in Oregon it takes 6 years of not paying your property taxes before they will foreclose. Owning a home as a senior gives you financial options.
I've sold several homes under conservatorship because the parents have Alzheimer's disease and those kids get to use the money from the home sale to care for parents. Those parents get to live in nicer facilities than those dependent on the state for care. While we all hope for good health, sometimes life has a different path for you. Best to plan for that event when possible.
Right, great post.
The nice thing is, if one prefers to be a renter, one has that choice. If one prefers to be a buyer, one has that choice, too.
The absolute falsehood of "not owning the home because the lender does," is paraded around here routinely. If someone actually believes that, they should probably have a responsible party making their financial decisions anyway.
I own my home because I chose to own a piece of dirt with an improvement on it. I wanted a piece of dirt deeded to me, protected by better legal provisions than a fragile tenancy on someone else's piece of dirt.
My choice. Right choice, FOR ME. And we have "Owned" it from the time the deed and the deed of trust were recorded.
Another advantage no one has mentioned is the property tax exemption. Property taxes are fully deductible on federal form so if you itemize and are an "average" family you're saving 25% of your annual property tax bill.
My 28 year old son just closed on a house yesterday. He'd been looking for one he could afford for a couple years. He's very happy even if it is a fixer upper to an extent. Fortunately he's fairly handy, much more so than I and I'm not too bad, just lazy.
The journey to yesterday, which began in November, is a story in itself which warrants its own thread.
Slave to a bank? Are you kidding me? How about slave to a landlord with a long list of things that you can't do? You gotta be an insect to want to live in a compound.
If you have a house you can paint it any color you want, you can landscape it any way you want, you can play records all night as long as you're not a total jerk, you can move walls if you know what you're doing, you can have a workshop in the basement, you can replace itsy bitsy windows with big beautiful sun-filled windows, you can do anything that you want, just like a real grownup.
And when you're done with life and don't mind living in a chamber, the house gives you a big bag of money.
YES, most Americans are OBSESSED with so called "home ownership" even tough only small percentage owns those homes free and clear. Signing up for a mortgage debt today when interest rates are artificially low and house prices up and inflated, in some areas more then back in 2005-2006 is terrible mistake.
House is a basic shelter, not investment vehicle or trading vehicle to get rich quick.
Americans desperately need lower housing prices so that they can afford to buy a house in their own country without beeing a debt slave for ever.
Homeownership will make sense again when house prices are cut in half and interest rates are above 8% or higher. Until then rent and live your life.
It's very sad to see what housing has become in America. Speculators heaven, get rich quick scheme, wall street pump and dump scheme, mortgage debt slavery for life. Investment instead of basic shelter.
I think people always want something they can call their own. People get tired of renting and want to have a house because they feel it is a investment and good for the future. And it can be if you don't start playing games leveraging and borrowing thinking the equity is yours to do as you please with. When I talk to someone who is a homeowner all I hear is how much their house is worth.
Home prices have gone up for all the wrong reasons in the past few years.
Mostly because of Wall Street Crooks, the Fed and because of speculators who are trading houses.
Non of these people look at housing as a basic shelter. For them housing is a trading vehicle like in the stock market.
It's pure insanity what is happening with housing again, just few short years after this same housing almost destroyed not only our country but the entire world.
Homes are overpriced everywhere thanks to artificial and low mortgage interest rates.
It's a very simple formula from the Fed...lower the interest rates and inflate housing prices, so that the banks can stay solvent.
No one should have to rent for 30 years, but you should happily rent today and in the next few years until interest rates go back to normal and house prices are cut in half.
Why would anyone buy a house today and pay those inflated prices is beyond me.
YES, most Americans are OBSESSED with so called "home ownership" even tough only small percentage owns those homes free and clear. Signing up for a mortgage debt today when interest rates are artificially low and house prices up and inflated, in some areas more then back in 2005-2006 is terrible mistake.
House is a basic shelter, not investment vehicle or trading vehicle to get rich quick.
Americans desperately need lower housing prices so that they can afford to buy a house in their own country without beeing a debt slave for ever.
Homeownership will make sense again when house prices are cut in half and interest rates are above 8% or higher. Until then rent and live your life.
It's very sad to see what housing has become in America. Speculators heaven, get rich quick scheme, wall street pump and dump scheme, mortgage debt slavery for life. Investment instead of basic shelter.
Quote:
Originally Posted by Olelvx
Home prices have gone up for all the wrong reasons in the past few years.
Mostly because of Wall Street Crooks, the Fed and because of speculators who are trading houses.
Non of these people look at housing as a basic shelter. For them housing is a trading vehicle like in the stock market.
It's pure insanity what is happening with housing again, just few short years after this same housing almost destroyed not only our country but the entire world.
Homes are overpriced everywhere thanks to artificial and low mortgage interest rates.
It's a very simple formula from the Fed...lower the interest rates and inflate housing prices, so that the banks can stay solvent.
No one should have to rent for 30 years, but you should happily rent today and in the next few years until interest rates go back to normal and house prices are cut in half.
Why would anyone buy a house today and pay those inflated prices is beyond me.
Please support the claim that "...only a small percentage owes their home free and clear."
How many people own with 30%, 40%, 50%, or more current equity?
Quantify, please. NOT schoolkid vagueness of "Not many," "very few," "Almost no one."
Why would anyone buy? Because in many markets it makes a lot of sense to buy, and because they want ownership, traditions, roots, stability, protection from landlords, and the entire list of privileges and responsibilities that come with ownership.
Before you belch out, "Of course, you are a Realtor, you think everyone should buy," restrain yourself.
I don't think that. I don't support interest or property tax tax deductions for owners. I just don't support vapid absolutism with no cogent basis, either.
Beats being a slave to a landlord for 60 or 70 years.
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