Homeownership=Throwing $ away? - Page 2

[Leta]

If you get a 15 year mortgage, at an interest rate of 10% or less, and your payment (including taxes and insurance) is no more than 28% of your gross income, you will be better off owning than renting all day long.

The problem is that the real estate bubble has been largely fueled by weird mortgages- ARMs, interest only, no down payment, etc. An interest only mortgage is the rough equivalent to renting, except you can end up upside down. Yay. I truly think there is a special circle of hell for predatory lenders.

[kittywitty]

Originally Posted by philomom

My dh and I are on our fourth house. If you stick to good school districts and make reasonable repairs and improvements to your home and land, you will make money when you sell.

As for renting, I can't see doing that with kids. It seems non-permanent somehow to me, as if you don't want to put down roots. Also, I don't know what it's like in many areas of the country but I lived in Atlanta, Ga and now I live in Portland, Or. The very best public schools in both of these cities have very few apartments in their school districts.

I agree. We are going to try to buy this summer. I have moved over 20 times in my 23 years. I have 3 kids. I just want to own a house so that we don't have to move everytime our landlords screw us over. Family and stability are huge issues with me from my family's history. Owning a house, to me, is like finally being stable.

I hate renting with a passion.

[cristeen]

Originally Posted by Lynski

I think the article is a little misleading when it talks about people paying property tax in addition to their mortgage. Just about everyone pays their taxes and homeowners insurance as a part of their payment. It seems like they are trying to make it sound like you pay your payment, plus taxes, etc.

That may be true where you live, but I have found it to be the exception out here. Most people here seem to pay them separately. If you don't have your 10 or 20% down, sure, you're forced to have impound accounts, but very few people I have worked with opt to have them voluntarily.

Originally Posted by newbymom05

Home ownership IS more expensive than renting--property taxes or course but the neverending repairs and maintenance add up as well.

I think this is really dependent on a lot of things. Even with all the cosmetic work that this house "needs", the actual necessities (plumbing, electric, roof, etc.) don't add up to that much if you take care of it. To rent in our area, we would be paying easily twice our mortgage payments for half the space, and still have to be responsible to some landlord.

Originally Posted by mommyddeville

Right now, we pay less in a monthly mortgage payment than we'd pay in rent. We also live in a better area than we could afford to rent in. If we were to sell our house right now, we'd make about $15,000, which is what we've paid as mortgage payments for the past two years. So, theoretically, we could have lived here for free for the past two years.

We're the same way. The rentals in our neighborhood are in bad shape, have lousy landlords, and rents are inflated. Outside of our neighborhood, there are few places here I would be willing to live that don't cost even more.

If we were to sell right now we would walk away with enough to buy a house in most any other part of the country. In the long run, that means it's all paid off.

Originally Posted by kijip

Owning can be an asset, but only if people have actual equity in thier homes. With all the 110% loans, negative amortization loans and the declining prices, many people are upside down on thier homes. In thier case their house is a libility. The asset is not your home, it is your equity, which thanks to bad lending and overuse of HELOC, many homeowners have *none*.

Unfortunately, this is the side effect of the mortgage lenders pushing loans to people who can't afford them, as well as people not doing their research (or believing the research if they do do it) before they buy. Working in real estate I saw this all too often. Heck, I tried to talk my parents out of a bad deal, but they didn't want to believe I knew anything about it (after almost 10 years in the business : ). Now, they're regretting not believing me. This is also one of the main reasons the mortgage lenders are now in trouble, both filing bankruptcy and with the feds investigating mortgage lending.

We just did our taxes last weekend. With what we made last year, if we were renting, we would have owed the IRS a big chunk of change. Because we own, and can deduct both mortgage interest and property taxes, we wound up with a nice refund. That makes a huge difference in our finances, but is one of the main reasons we choose to own. Sure, we couldn't afford to buy now. The market is in the toilet, prices skyrocketed and so did interest rates. But we bought for the long-term. If we ever sell this place, it will be to move elsewhere, another city, another state maybe. If I'm lucky, a large piece of land in the middle of nowhere. In the end, that makes the hassles of homeownership worth it.

[JustKiya]

Originally Posted by Leta

If you get a 15 year mortgage, at an interest rate of 10% or less, and your payment (including taxes and insurance) is no more than 28% of your gross income, you will be better off owning than renting all day long.

The problem is that the real estate bubble has been largely fueled by weird mortgages- ARMs, interest only, no down payment, etc. An interest only mortgage is the rough equivalent to renting, except you can end up upside down. Yay. I truly think there is a special circle of hell for predatory lenders.

Precisely and all together right.
DH & I recently brought a house (almost a year ago now), and it freaked me OUT with how many (who I thought were smart, with-it people) suggested that we get a ARM with a super low teaser rate - and then just refi when the rates started to rise on the loan. I thought that was about the dumbest thing I heard for two reasons- 1) Interest rates are at one of their lowest rates in FOREVER - why wouldn't you want to lock that in? 2) What if we CAN'T refi? What if the housing market tanks? What if interest rates rise higher than the low rates now?
There were too many loose ends for us to gamble on being able keep up with the payments - no matter HOW low they were to start with. And since we plan on staying in our house til they carry us out - getting a loan that would change in 3/5/7 years was - well, not wise.

Also - the reason they may exclude taxes when talking about it, is because the actual LOAN payment that is advertised normally does NOT take taxes/insurance into account. The amount that you see advertised for most loans is the P/I - principal and interest. Your actual mortgage payment is usually PITI - principal/interest/taxes/insurance - this, unless you ask, you might not find out til closing.
Our loan payment in 630. Our mortgage payment is 940 - and we live in the highest taxed area in our region - which is one of the lowest taxed places in the country - so I KNOW the jump is even bigger in other places.

[ShaggyDaddy]

To quote Lex Luthor...

You can print money, manufacture diamonds and people are a dime a dozen, but they’ll always need land. It’s the one thing we’re not making any more of.
----------------------

[dillonandmarasmom]

It always seems so strange to me how people seem to become defensive around this argument. I don't judge anyone for renting, it's just not for me or my family.
I want to own a home so I don't have to answer to anyone when I feel like changing something about it. I also own a home to have a permanent place for my family to grow in. With renting (I am speaking of renting homes, not apartments/condos), you have a possibility of your home owner (landlord/lady) choosing to sell the home you're in. If it is a place you love, this can be very difficult. I could not live with that--I am a worrier.
As for taxes, many homeowners pay property taxes through an escrow (like a special savings) and never notice them at all. Then, when taxes come around, not only do you get a little something back for paying mortgage interest, your taxes are deductible, too.
We bought in 2000-2001. Our home value has actually almost tripled. We went for a lower interest rate and some cash about a year ago to help me stay at home, but we still have over 100,000 in equity. We pay less on our mortgage than most pay in rent for a smaller home in our area.
I guess it is a matter of timing. I would not be able to buy a home in the current market, nor would I even consider selling.
I believe it could also have to do with how you were raised. I had a friend who was determined to own a home since she was an army kid. She moved often, never had permanent friends. She bought a home on an ARM and it ended last year. Fortunately, she was able to refinance at a great rate. But, many can't. It's a scary market right now.

[momto l&a]

Living in a rented house one get to live with junk as the landlords just don't want to spend $$$ to fix things.

Right now the house we rent the hot water tank is being replaced. The owners kinda though we should live the the leaky tank when they heard how much it would cost.

If the owners would put in a water softener is would save loads of money for them in appliance repair and replacement but they wont do it.

I prefer owning.

We have owned twice and each time made good money off the place when we sold it

[monkey's mom]

I think now is a terrific time to buy--hence the term "buyer's market." Prices are dropping fast, interest rates are still good, and there are a ton of desperate sellers out there.

Two years ago when the prices were inflated was not such a great time to buy, but people were doing it in droves and no one said, "Boo."

Of course, I'm all about real estate as an investment--buy when it's cheap, fix it up, sit on it, and sell when it's booming. And while the housing market has dipped at times, it still keeps going up. As shaggy daddy says, "They aren't building any new land."

I'd buy a fleet of houses right now if I had the bank.

[glendora]

Well, for what it's worth, I'm in one of the places where it's better to be renting at the moment. Our landlord is taking a 1000 dollar loss every month on both the properties she rents out. She bought in 2005. The market tanked last summer, and it's not stabilized, yet. Our neighbors across the street took a 60k loss in the first six months they were here. So everyone out here freaked out. There are 9 houses for sale on my street, from people that thought they'd wait for the high point--and the glut means that they're driving prices even lower. Thing is, that even with the current correction, prices are still too high--property that went for 80k in 2001 is supposedly worth 330k, now. We're talking 230k for a double wide trailer on a zero lot. Only no one is buying. And, given gas prices, no one will. We're too far too commute anymore.

If you're in a place were prices didn't go crazy, then yeah, now might be a good time to buy. But... if you're in Cali, or Boston, or anywhere else where things simply with NUTSO, then waiting is actually a pretty good move.

[monkey's mom]

Originally Posted by glendora

Well, for what it's worth, I'm in one of the places where it's better to be renting at the moment. Our landlord is taking a 1000 dollar loss every month on both the properties she rents out. She bought in 2005.

See, I still think she's doing OK b/c if she's only paying $1,000/mo for two houses, that's a pretty good deal. I wouldn't advise purchasing rental properties when the market is hot like she did--but I still think in the long run, she's gonna own two houses that she barely paid anything for.

[daekini]

I wonder if within a certain price range you are more likely to get a reasonable home at a reasonable price. For some reason I keep seeing numbers above $250K in reference to overpriced homes. I can't imagine being able to get what I'm buying for less than what I'm paying at $145K in any market. It's a great house; small, but with a big yard and less than 7 years old. It seems like a fair price to me. I'm confused because one moment people are saying "it's a buyers market", then contradicting themselves by telling themselves and others not to buy.

[glendora]

Originally Posted by monkey's mom

See, I still think she's doing OK b/c if she's only paying $1,000/mo for two houses, that's a pretty good deal. I wouldn't advise purchasing rental properties when the market is hot like she did--but I still think in the long run, she's gonna own two houses that she barely paid anything for.

She's paying 2000 a month for two houses. Plus her own mortgage. Plus she's going to have to wait about 10 years for those houses to even get back up to retaining the value of the mortgages she took out.

So, in 10 years time, she'll have houses that are worth the asking price in 2005. Maybe. Which means that the investment didn't even keep up with inflation, let alone pay off. She, like the folks across the street, made a bad choice moneywise.

[monkey's mom]

Originally Posted by glendora

Plus she's going to have to wait about 10 years for those houses to even get back up to retaining the value of the mortgage she took out.

But, there's no way to know that--it's not a given. Depending on where you are, I'd venture to say that it will be much quicker than that.

And she's not paying all that mortgage she took out--renters are paying some of it.

[glendora]

Originally Posted by monkey's mom

But, there's no way to know that--it's not a given. Depending on where you are, I'd venture to say that it will be much quicker than that.

And she's not paying all that mortgage she took out--renters are paying some of it.

She's spending 2k a month on an investment that's currently paying out 2k a month. She's breaking even, and if she sold right now she'd take a loss of tens of thousands of dollars.

My area is sort of unusual--it's a resort town that rode the speculative boom, but it's four hours from the city. It's not going to recover as quickly as a suburb. And, if gas prices continue to spike, (which they will, China's not moving to biofuel anytime soon) that recovery is going to be even slower.

To be a sound way to at least save your money, it needs to grow at at least the pace of inflation. To be an actual investment, instead of essentially just sticking it in a holding account, your money needs to grow. That's not going to happen with real estate in this area at the moment.

If you could actually see the chart of just how insane the bubble was here, you'd know that the "correction" isn't going to be a 6 month dip.

[glendora]

http://video.google.com/videoplay?do...99799528285056

Just for fun.

[monkey's mom]

Originally Posted by glendora

She's spending 2k a month on an investment that's currently paying out 2k a month. She's breaking even, and if she sold right now she'd take a loss of tens of thousands of dollars.

Right. But she's not selling right now, is she? That would be suicide! She won't be breaking even forever--once that mortgage is paid down or off and rents are raised, the profits are going to go up considerably.

Even if the house isn't worth any more than what she bought it for in 10 yrs, she still has something worth x, that she paid 1/2 of x for. It's a loooong term investment to have a rental property and it can be a very profitable venture, but it's definitely not a short term thing like a "flip." And if you bought when the market was inflated (as she did), then the profit isn't going to be on the front end. But, if she sticks it out for a handful of years, there's likely to be a big profit at the back end. So, I'd say that is a sound investment.

[glendora]

Originally Posted by monkey's mom

Right. But she's not selling right now, is she? That would be suicide! She won't be breaking even forever--once that mortgage is paid down or off and rents are raised, the profits are going to go up considerably.

Even if the house isn't worth any more than what she bought it for in 10 yrs, she still has something worth x, that she paid 1/2 of x for. It's a loooong term investment to have a rental property and it can be a very profitable venture, but it's definitely not a short term thing like a "flip." And if you bought when the market was inflated (as she did), then the profit isn't going to be on the front end. But, if she sticks it out for a handful of years, there's likely to be a big profit at the back end. So, I'd say that is a sound investment.

I wouldn't. There are better things should could have done with it. And, investment that sits around losing money for a decade isn't "sound." All it does it tie up your assets. And, waiting 20 or 30 years? Until the mortgage is paid off? There are better ways to make money.

And, yes, she has to sell one of them. She's cutting her losses and starting a business.

[glendora]

And, really, you don't live in this area, and aren't familiar with the bubble, so why are you fighting me so hard about this?

Are you a realtor? A lender? 'Cause, really there's not many other reasons to be this invested in the idea that home ownership is always a good way to make money, anywhere, no matter what the circumstances.

[monkey's mom]

Originally Posted by glendora

I wouldn't. There are better things should could have done with it. And, investment that sits around losing money for a decade isn't "sound."

But it's not a guaranteed loss for 10 yrs. You don't know that.

I just don't understand how paying half for something that you get ALL of in the end is a bad deal. ?? And after you get ALL of it, someone else starts paying back the other 1/2 you put in before. How isn't that sound?

[monkey's mom]

Originally Posted by glendora

And, really, you don't live in this area, and aren't familiar with the bubble, so why are you fighting me so hard about this?

Are you a realtor? A lender? 'Cause, really there's not many other reasons to be this invested in the idea that home ownership is always a good way to make money, anywhere, no matter what the circumstances.

I thought it was an interesting discussion. Sorry, then.