Owning a house.
 

I'm watching TLC about couples buying houses and living together. It seems to me the thought of buying a house is worthless for the fact that the bank owns it and you're going to end up paying 3x the price if you dont just pay up front. Your thoughts?

Re: Owning a house.
 

Your house appreciates in value too. It works out that if you get a good mortgage rate, it is in your BEST INTEREST to NOT pay it off right away even if you can. You can simply pay the mortgage and invest the money you would have used to pay off the house in the stock market and get better returns then just buying the house outright.

Re: Owning a house.
 

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It seems to me the thought of buying a house is worthless for the fact that the bank owns it and you're going to end up paying 3x the price if you dont just pay up front. Your thoughts?

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The interest you pay is kinda like rent. And it's tax deductible. Unless your interest rate is huge, it works out much cheaper than renting, and that doesn't take appreciation into account.

Re: Owning a house.
 

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I'm watching TLC about couples buying houses and living together. It seems to me the thought of buying a house is worthless for the fact that the bank owns it and you're going to end up paying 3x the price if you dont just pay up front. Your thoughts?

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This post kinda makes my head hurt, not trying to be a dick, but i'm also not really sure to begin....

My guess is that anyone who is having their story put onto TLC probably has some get rich quick/flip plan for their house and stands a decent chance of getting in over their head.

But for the millions of Mom/Dad/2.4 Kids/Dog families out there buying a house and living in it for 20-40 years is probably the best investment that any of them will ever make.

Long term, what is the alternative to a mortgage?

Re: Owning a house.
 

My wife and I bought a 89K town house ( no kids, small dog and I loooooove not having to mow the lawn myself) less then 2 miles from the apartment we were living in. Our interest rate is 6.5%. We have only paid off about 1.4K of the principal so far, but our monthly payment is only $756 a month ( not paying more on it each month as we have some other debt at higher interest rates that we are paying off).

When we left our apartment the rent was going up to 800 a month, and is now at 850. The house is also much nicer.

The house was an excellent investment.

Ken

Re: Owning a house.
 

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Long term, what is the alternative to a mortgage?

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Renting.

Which I love oh so much more. The thought of never owning a house makes me giddy.

Re: Owning a house.
 

Ken,

How much are property taxes, maintenance costs, and homeowners' fees?

Re: Owning a house.
 

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Ken,

How much are property taxes, maintenance costs, and homeowners' fees?

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Also the "You can deduct your mortgage" is overrated. You already get a standard deduction of $10,300. Unless you are carrying a large note or donate lots of money to charity then it is not the steal you think it is. The appreciation should be the real reason. If you think you will be moving in the next 2 years don't waste your time.

There is a great feeling in having your oen home but you have to be ready to settle down or it is not going to work out as well as you hoped.

Re: Owning a house.
 

Ken,
Your situation seems good. However in many parts of the country is not possible to buy a place anywhere near that cheap. Condos near where I live in Tempe are going for $250k+.
ugh...
I don't think I'll ever own a place around here.

Re: Owning a house.
 

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Ken,

How much are property taxes, maintenance costs, and homeowners' fees?

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Also the "You can deduct your mortgage" is overrated. You already get a standard deduction of $10,300. Unless you are carrying a large note or donate lots of money to charity then it is not the steal you think it is. The appreciation should be the real reason. If you think you will be moving in the next 2 years don't waste your time.

There is a great feeling in having your oen home but you have to be ready to settle down or it is not going to work out as well as you hoped.

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PA,

The standard deduction issue you raise is rarely an issue with families. Also, the MI deduction is one of the few which can still be taken under AMT. This is critical for high income families.

I agree with the rest of what you said. Buying a house recently was made too easy, taken too lightly by purchasers, used as an ATM by suckers who live beyond their means, and used as a get rich scheme by fliptards.

J

Re: Owning a house.
 

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Also the "You can deduct your mortgage" is overrated.

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You pay about 60k in interest in the first 5 years on a 250k 25 yr loan at 6%. That seems like a substantial chunk to me to be able to deduct.

Re: Owning a house.
 

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Also the "You can deduct your mortgage" is overrated.

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You pay about 60k in interest in the first 5 years on a 250k 25 yr loan at 6%. That seems like a substantial chunk to me to be able to deduct.

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It seems like a substantial amount to pay as well. So you pay $60k in interest and pay $18k less in taxes in that time... hmm, where's the deal? But it is really the other costs that really make buying a house not much a deal or a wash, or even a bad idea.


You guys realize, adjusted for inflation, real estate doesn't appreciate over time, right?

Re: Owning a house.
 

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Also the "You can deduct your mortgage" is overrated.

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You pay about 60k in interest in the first 5 years on a 250k 25 yr loan at 6%. That seems like a substantial chunk to me to be able to deduct.

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Right, so 60k/5 is 12k. You already get to deduct $10,300 no matter what. Now you got to deduct $1700 by paying 12k in interest. You saved about $425 in taxes. After the first 5 years or so the interest will be less then your standard deduction and you will not be able to deduct anything. What you don't get I guess is that you and your wife already can deduct most of the mortgage advantage anyway. If you are single it has more of an advantage but it still is not as good as the mortgage industry would want you to think.

Re: Owning a house.
 

But can you deduct the first 10,300 if you don't have a mortgage to begin with?

I'm unfamiliar with this since I'm not American.

Re: Owning a house.
 

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But can you deduct the first 10,300 if you don't have a mortgage to begin with?

I'm unfamiliar with this since I'm not American.

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Yes.

Re: Owning a house.
 

Well in that case, what a scam.

Re: Owning a house.
 

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I'm watching TLC about couples buying houses and living together. It seems to me the thought of buying a house is worthless for the fact that the bank owns it and you're going to end up paying 3x the price if you dont just pay up front. Your thoughts?

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The bank doesn't own it. Please tell me how the bank owns the house...I'm really interested to know.

Re: Owning a house.
 

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Also the "You can deduct your mortgage" is overrated.

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You pay about 60k in interest in the first 5 years on a 250k 25 yr loan at 6%. That seems like a substantial chunk to me to be able to deduct.

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Right, so 60k/5 is 12k. You already get to deduct $10,300 no matter what. Now you got to deduct $1700 by paying 12k in interest. You saved about $425 in taxes.

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Your logic is flawed. With 12K in MI payments, you would deduct 12K + whatever other items you can.

The most common flaw in overstatement of MI deduction benefit is that people miscalculate and treat all MI as free money as it is "tax deductible". In reality of course people often pay $3 to get $1 back and think they are coming out ahead.

J

Re: Owning a house.
 

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I'm watching TLC about couples buying houses and living together. It seems to me the thought of buying a house is worthless for the fact that the bank owns it and you're going to end up paying 3x the price if you dont just pay up front. Your thoughts?

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The bank doesn't own it. Please tell me how the bank owns the house...I'm really interested to know.

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Who do they pay when they get their paycheck? The bank for their home, the bank for their car, and the bank for their credit cards.

That's why bank stock is gogogogo.

Re: Owning a house.
 

I think ya'll are looking at this in too much of a short-term perspective. Of course it's stupid to buy a house if you only plan on living there for 3 years. I'm sure plenty of you know someone who lives in a very nice house right now and is paying $700 on the mortgage because they bought it a while ago. It's a solid move if you're market isn't over-inflated and you plan to stay for a while.

Re: Owning a house.
 

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Who do they pay when they get their paycheck? The bank for their home, the bank for their car, and the bank for their credit cards.

That's why bank stock is gogogogo.

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owing the bank on a home is a lot different than a car or credit card, DUCY?

Re: Owning a house.
 

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Your house appreciates in value too. It works out that if you get a good mortgage rate, it is in your BEST INTEREST to NOT pay it off right away even if you can. You can simply pay the mortgage and invest the money you would have used to pay off the house in the stock market and get better returns then just buying the house outright.

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This is regurgitated so much on here, it should be stickied. Not that it is wrong, per se, it just leaves a whole lot of stuff out. Non-mathematical reasons for wanting to own a home.

Also, appreciation is over-rated. To realize this, one needs to sell their home. And when one sells their home, they need to buy another one...which has appreciated similarly to the one they just sold. One way to realistically capitalize on "appreciation" is to "move down" ie, go from 3000 sq. ft. to 2500 sq. ft., move to another area of that major city which is yet to appreciate, or move to another market altogether (that has lagged behind).

Your primary shelter should be thought of more as utility and less as investment.

Re: Owning a house.
 

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I think ya'll are looking at this in too much of a short-term perspective. Of course it's stupid to buy a house if you only plan on living there for 3 years. I'm sure plenty of you know someone who lives in a very nice house right now and is paying $700 on the mortgage because they bought it a while ago. It's a solid move if you're market isn't over-inflated and you plan to stay for a while.

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Results oriented-thinking about the short-term. Long-term houses appreciate at almost exactly the rate of inflation. And there are costs that go along with this (interest, taxes, maintenance, etc). Sure, you are leveraged so that can help, but it is often a much better idea to put that money elsewhere and rent.

Re: Owning a house.
 

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I think ya'll are looking at this in too much of a short-term perspective. Of course it's stupid to buy a house if you only plan on living there for 3 years. I'm sure plenty of you know someone who lives in a very nice house right now and is paying $700 on the mortgage because they bought it a while ago. It's a solid move if you're market isn't over-inflated and you plan to stay for a while.

[/ QUOTE ]

Results oriented-thinking about the short-term. Long-term houses appreciate at almost exactly the rate of inflation. And there are costs that go along with this (interest, taxes, maintenance, etc). Sure, you are leveraged so that can help, but it is often a much better idea to put that money elsewhere and rent.

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I believe that article to be incorrect as stated in a previous post. But, generally speaking,if you're smart enough to know that you can beat real estate on average by investing and renting, you should be smart enough to do even better by selecting a quality real estate investment. The pitfalls of renting, such as forfeited security deposits and having to move/pay to move every year or two is not ideal when you have a family. There are several handfuls of people who've gotten filthy rich in the real estate market. Don't be confused by the average and somewhat uninformed home buyer, people are buying homes all the time for all kinds of prices, it's silly to believe that the smart money doesn't have an edge.

Re: Owning a house.
 

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I think ya'll are looking at this in too much of a short-term perspective. Of course it's stupid to buy a house if you only plan on living there for 3 years. I'm sure plenty of you know someone who lives in a very nice house right now and is paying $700 on the mortgage because they bought it a while ago. It's a solid move if you're market isn't over-inflated and you plan to stay for a while.

[/ QUOTE ]

Results oriented-thinking about the short-term. Long-term houses appreciate at almost exactly the rate of inflation. And there are costs that go along with this (interest, taxes, maintenance, etc). Sure, you are leveraged so that can help, but it is often a much better idea to put that money elsewhere and rent.

[/ QUOTE ]

There are several handfuls of people who've gotten filthy rich in the real estate market. Don't be confused by the average and somewhat uninformed home buyer, people are buying homes all the time for all kinds of prices, it's silly to believe that the smart money doesn't have an edge.

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So this is what we got by joining finance and investing to the mlm forum?

I agree with the unquoted part of your post and wish you would have just stopped talking.

It is nice to see the ill informed and naive renter posts of meteron et al after I have been subjected to years of housing never goes down and other such drivel. I especially loved the canadian twit declaring scam after a two second intro to the american tax system.

J

Re: Owning a house.
 

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owing the bank on a home is a lot different than a car or credit card, DUCY?

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Yeah because with a house you're going to pay $200K in interest rather than a few K on a car or credit cards. Obviously you didn't get my point whatsoever which is that the bank wins when it's all said and done.

Re: Owning a house.
 

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[ QUOTE ]
[ QUOTE ]
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I think ya'll are looking at this in too much of a short-term perspective. Of course it's stupid to buy a house if you only plan on living there for 3 years. I'm sure plenty of you know someone who lives in a very nice house right now and is paying $700 on the mortgage because they bought it a while ago. It's a solid move if you're market isn't over-inflated and you plan to stay for a while.

[/ QUOTE ]

Results oriented-thinking about the short-term. Long-term houses appreciate at almost exactly the rate of inflation. And there are costs that go along with this (interest, taxes, maintenance, etc). Sure, you are leveraged so that can help, but it is often a much better idea to put that money elsewhere and rent.

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There are several handfuls of people who've gotten filthy rich in the real estate market. Don't be confused by the average and somewhat uninformed home buyer, people are buying homes all the time for all kinds of prices, it's silly to believe that the smart money doesn't have an edge.

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So this is what we got by joining finance and investing to the mlm forum?

I agree with the unquoted part of your post and wish you would have just stopped talking.

It is nice to see the ill informed and naive renter posts of meteron et al after I have been subjected to years of housing never goes down and other such drivel. I especially loved the canadian twit declaring scam after a two second intro to the american tax system.

J

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lol. you seriously need to lighten up.

Re: Owning a house.
 

Brad,

I think he's talking about the fact that credit debt, and cars (typically) depreciate in value like crazy. A home is a "safer" debt. Even the staunchest of debt-naysayers (such as Dave Ramsey) usually say house debt isn't a biggy.

Re: Owning a house.
 

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owing the bank on a home is a lot different than a car or credit card, DUCY?

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Yeah because with a house you're going to pay $200K in interest rather than a few K on a car or credit cards. Obviously you didn't get my point whatsoever which is that the bank wins when it's all said and done.

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As do the credit card companies and the auto loan companies. The difference is that when you buy a house, it has a chance to appreciate.

Most of the other items you take out loans for depreciate and sometimes the debt lingers for longer than the item's lifespan.

Re: Owning a house.
 

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You guys realize, adjusted for inflation, real estate doesn't appreciate over time, right?

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http://www.speculativebubble.com/images/homevalues1.gif

Re: Owning a house.
 

Well if you include 115 years of property taxes + maintenance the chart would probably be close to breakeven.

Re: Owning a house.
 

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Well if you include 115 years of property taxes + maintenance the chart would probably be close to breakeven.

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So after 110 years it has doubled. And all of that is the last 10 years before which it simply went up 10% after 100 years. Are you trying to make my point for me?

Also, that doesn't include any of the costs (interest, property tax, maintenance - because homes don't last forever) in that graph.

Re: Owning a house.
 

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Yeah because with a house you're going to pay $200K in interest rather than a few K on a car or credit cards. Obviously you didn't get my point whatsoever which is that the bank wins when it's all said and done.

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True that the bank always wins, but so do intelligent home buyers. Tons of people made out like bandits in the recent real estate run up. When the market goes up, leveraged homeowners sell out and wait for the next rush. And like I said earlier, if you're a savvy buyer and choose good locations you stand to do a lot better than the average IMO. Whether right now is the time to buy is based on your local variables.

RE: the graph of home price vs. inflation. As stated in a previous post, that graph is very questionable because of different sizes of houses it's comparing etc. Search the forum it wasn't too long ago. Even if the graph is pretty close to accurate, it would be pretty easy to identify good times to sell and make the most out of it. If I buy a $400k house in 1999 and I know I can get $750-800k for it in 2004, isn't it obviously time to sell?

Re: Owning a house.
 

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Results oriented-thinking about the short-term. Long-term houses appreciate at almost exactly the rate of inflation. And there are costs that go along with this (interest, taxes, maintenance, etc). Sure, you are leveraged so that can help, but it is often a much better idea to put that money elsewhere and rent.

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in a typical market, a house appreciates about 8% every year or another way to think about it is it doubles in value every 10 years. that does much better than inflation.

regarding leveraging, my current house i used about $8,000 and bought the house under market value for $125,000. in four years it has done exceptionally well due to various market conditions and i expect to sell it for around $250,000 this summer. after broker fees i expect to net a bit over $100,000. not bad for an $8,000 purchase four years ago.

you may not like the occasional headaches that go along w/ owning but it's hard to argue w/ the numbers.

Re: Owning a house.
 

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So after 110 years it has doubled. Are you trying to make my point for me?


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That's what I was thinking. This chart actually looks way worse than what I thought the housing market yields. He made your point, and then some.

Re: Owning a house.
 

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[ QUOTE ]


Results oriented-thinking about the short-term. Long-term houses appreciate at almost exactly the rate of inflation. And there are costs that go along with this (interest, taxes, maintenance, etc). Sure, you are leveraged so that can help, but it is often a much better idea to put that money elsewhere and rent.

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in a typical market, a house appreciates about 8% every year or another way to think about it is it doubles in value every 10 years. that does much better than inflation.

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Where did you get this from? Back up your stats please. The graph posted disagrees with you.

Re: Owning a house.
 

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regarding leveraging, my current house i used about $8,000 and bought the house under market value for $125,000. in four years it has done exceptionally well due to various market conditions and i expect to sell it for around $250,000 this summer. after broker fees i expect to net a bit over $100,000. not bad for an $8,000 purchase four years ago.

you may not like the occasional headaches that go along w/ owning but it's hard to argue w/ the numbers.

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You are posting incredibly short term results where the real estate market has done abnormally well. This is not even remotely typically and I'm actually pretty surprised that so many people think this way in this forum.

Re: Owning a house.
 

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So after 110 years it has doubled. Are you trying to make my point for me?


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That's what I was thinking. This chart actually looks way worse than what I thought the housing market yields. He made your point, and then some.

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Yeah I'm not so sure what the point was. I understand it is inflation-adjusted, but I can come up with a ton of investments with much better inflation-adjusted returns.

Re: Owning a house.
 

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Results oriented-thinking about the short-term. Long-term houses appreciate at almost exactly the rate of inflation. And there are costs that go along with this (interest, taxes, maintenance, etc). Sure, you are leveraged so that can help, but it is often a much better idea to put that money elsewhere and rent.

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you may not like the occasional headaches that go along w/ owning but it's hard to argue w/ the numbers.

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It's also a quality of life issue. Owning your own home is almost always an upgrade to your quality of life.

Re: Owning a house.
 

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Where did you get this from? Back up your stats please. The graph posted disagrees with you.

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That graph is almost useless IMO and it was made to get the result that the author wanted. However, the trends that it shows are real and clearly point out to the reader that buying low and selling high works.

While renting is likely the best thing to do right now depending on your location, keep your eyes open for good foreclosure deals or motivated seller's who are down on their luck and need to sell. That's an easy way to win at real estate if you're smart and do some research.