Why didn't you just sell the house and purchase a cheaper property you can actually afford?
My rent is $440 a month, PLEASE PLEASE do show me a mortage where my interest rates are less than that.. any house near me is +200k.... The house when I bought it was 179... Me and a freind bought it with the plan to fix it up and sell it in 5 years, we stuck to the plan added a 2nd bath. Sold for 245. Now I rent at $440 a month.. even with a mortage of $800 + $220 a month property tax that's $1020. That $220 is a total waste. So $220 vs 800.... now if I save $680 every month instead of paying it into a house over 20 years that's $163,200.00 Now to actually take out a loan of $163,200.00 would cost me $1,103.00 a month for 20 years. It would literally cost me double to own a house. This also does not include realstate fees, lawyer fees, land transfer tax...
Very well said !! 99% of people are not able to do these simple maths.
I was doing a little more thinking about this, and I realized that you didn't factor inflation into your rent calculations. You may only be paying $440 a month in rent now, but at 3% inflation, you'll be paying close to $800/month 20 years from now. With these numbers, it's true that over 20 years your rent will always be lower than a mortgage. But after that time, you'll also have equity in the house, whereas with renting of course you'll have nothing. And when looking at that equity, don't forget that that will also be affected by inflation. So that $165k house that you could have bought now would also have almost doubled in value (again assuming the same 3% inflation rate). And finally, don't forget about what happens after 20 years. If you stay in that house, you now pay nothing except property taxes, which should be a lot less than rent, which would continue to increase. So in the long run, owning still has a good shot at beating renting, but it obviously depends on your particular situation. All of that said, of course, the math is very different if you buy during a bubble. Edit: Even once you own your home, you'd still be paying homeowners insurance in addition to property taxes...forgot about that.
Yes you will pay property tax + insurance that also increase every year.
Then it's a gamble : you have no guarantee that the bubble (housing market) will continue to grow at that rate in the next 20 years.
20 years ! Come on, with all the events that are happening right now, how can someone make a plan for the next 20 years ??
Any shit can happen, any time.
This old thinking of taking a 20 years mortgage for owning your house is
obsolete. We do not live in the same world as our parents and grandparents. The world has changed, rules as changed and the speed of changes is increasing
exponentially.
The are 2 kinds of people : dead and alive. We all die but the ones who adapt the changes of time tend to live much longer and better.
Yes, property tax and insurance increase, too, but prop tax + ins is a lot less than the rent I would pay on the same size house. So both will grow, but rent will grow more in absolute terms.
I don't think there's any single solution that works best for everyone. If you're single and move fairly often, then renting makes a lot of sense. If you have kids and intend to stay in the same area for a long period of time, then owning makes more sense.
And as I said, the state of the housing market certainly matters. It will be much harder for an investment in a house to pay off if you buy at the top of a bubble period. But as long as your timing isn't too bad, I think you will end up with more wealth in the end if you own rather than rent. Look at it this way: if you own, you pay mortgage, interest, property tax, insurance, and maintenance. If you rent, unless the owner paid for the property with cash, you're basically paying all of those things plus profit; you're just paying them all through your landlord. And when renting, after 20 or 30 years, your landlord still owns the property, not you.
