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#61 of 117 Old 04-12-2007, 05:53 PM
 
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Originally Posted by dillonandmarasmom View Post
Yeah, too many people are so quick to hand out advice about *not* doing it. Well, we did an almost 0% down payment and utilized a program set up for educators (what I do/did). It worked out perfectly. We got a great rate, then, 2 years later refinanced for an even better rate and cashed out some of our equity.
I truly wish the people who *think* they know better would just let those of us who are trying to do our best learn from our own decisions. Not all of them are mistakes...sheesh!
This is directed at me. Do you think that my opinion is based on NOT wanting you, personally, to own a home? I don't even know you... why would I care? No, it comes from being kind enough to share MY experience. This is the kind of attitude that really gets me. People aren't out to "get you"... we're trying to help you not make mistakes. Why do you think I give a flip if you take the plunge? I don't. As we approach retirement, I am so glad that I had older people in my life to give me advice... we are basically set for life and if we hadn't made some decisions based on advice instead of "learning for ourselves" we would be facing retirement in debt and many more years of working. Why can't you take the advice in the spirit it is given... to help.

By the way, it's all over the news... all of the creative ways of financing a home... coming back to haunt millions of people RIGHT NOW. This so-called creative financing is being investigated by the FED and there will be millions of foreclosures over the next few years... all because people were told, "yeah, you can afford it without a down payment". Having a down payment may not necessary for everyone... but it is the SAFE way for everyone.
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#62 of 117 Old 04-12-2007, 06:07 PM
 
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No down payment works if you are wise enough to buy a home that fits your budget. Figure out the payment that works for you and buy a home that will give you that payment. What's the difference between buying a $145K home with $X payment (including taxes, pmi, insurance) and buying a $200K home with the same $X payment? House size. Or neighborhood. As long as you have a fixed, prime rate, standard 15-30yr loan, and can tolerate a smaller home, why not do 100% financing????? What's the big deal???? I don't need a bigger home. Homes in my price range sell quicker here. I'd rather stay small and own than throw my money away - and yes that is what I said. I'd rather "maybe" get something back when I sell than "definitely only get my deposit back". Either way it's a crap shoot and only you know what is right for you.
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#63 of 117 Old 04-12-2007, 06:29 PM
 
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What's the difference between buying a $145K home with $X payment (including taxes, pmi, insurance) and buying a $200K home with the same $X payment? House size. Or neighborhood.
No, the difference is NET WORTH. This is what gets Americans into trouble... they only think about the monthly payments. What you should be thinking about is how this house fits into my financial goals and how can I maximize my net worth.
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#64 of 117 Old 04-12-2007, 06:31 PM
 
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Yes, that is a good point. But with renting you have no chance of any worth at all. Even if you can save some money, it is only going to be whatever amount you can scrape together after what you're giving to your landlord in rent.
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#65 of 117 Old 04-12-2007, 06:45 PM
 
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Yes, that is a good point. But with renting you have no chance of any worth at all. Even if you can save some money, it is only going to be whatever amount you can scrape together after what you're giving to your landlord in rent.
You're assuming that all people who rent do so only because they can't afford to own a home. There are a lot of wealthy people (high net worth) out there who rent by choice, you know. Home owning and wealth are not mutually exclusive.

Likewise, owning a home when you can't afford it doesn't necessarily make you rich.
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#66 of 117 Old 04-12-2007, 06:55 PM
 
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Actually, I was not making that assumption. Perhaps the words "scrape together" confused you. What I meant was that you have to give money to the landlord before you save money for yourself. Afterall, I can afford a home and I chose to rent because we weren't sure we wanted to settle here. Now we know. So, we're buying.

So - the only way someone can justify buying a home is if they have 20% down and get a traditional fixed rate loan. Am I correct?
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#67 of 117 Old 04-12-2007, 07:21 PM
 
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So - the only way someone can justify buying a home is if they have 20% down and get a traditional fixed rate loan. Am I correct?
No, I'm saying that you need to be able to afford the home. I'm saying that the SAFEST (fiscally) way to buy a home is to put at least 20% down and use a conventional loan, unless you can pay for it outright. Less than that and you are getting into murky mortgage waters (those very waters being investigated now) including things like PMI and higher-rate HELOCs. Once you introduce additional loans, etc. to own your home loan, then it is more likely that you will default. The point is that buying a home should be a SAFE investment, not a risky investment. That's all I'm saying.
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#68 of 117 Old 04-12-2007, 08:54 PM
 
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This is directed at me. Do you think that my opinion is based on NOT wanting you, personally, to own a home? I don't even know you... why would I care? No, it comes from being kind enough to share MY experience. This is the kind of attitude that really gets me. People aren't out to "get you"... we're trying to help you not make mistakes. Why do you think I give a flip if you take the plunge? I don't. As we approach retirement, I am so glad that I had older people in my life to give me advice... we are basically set for life and if we hadn't made some decisions based on advice instead of "learning for ourselves" we would be facing retirement in debt and many more years of working. Why can't you take the advice in the spirit it is given... to help.

By the way, it's all over the news... all of the creative ways of financing a home... coming back to haunt millions of people RIGHT NOW. This so-called creative financing is being investigated by the FED and there will be millions of foreclosures over the next few years... all because people were told, "yeah, you can afford it without a down payment". Having a down payment may not necessary for everyone... but it is the SAFE way for everyone.

Nope, not directed at you. I hadn't really read many of the posts by you, to be quite honest. Your stance is clear.
I was related my experience with people who tried to talk us out of our choices to another poster with a simialr experience.
Sorry if you took it personally.
I have to say, buying our home with no down payment was a great thing for us at the time. People tried to warn us--I have yet to see anything negative come of our choice. It just gets to be a better decision as time wears on .

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#69 of 117 Old 04-13-2007, 12:24 AM
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Not trying to lash out at anyone really, but it drives me crazy when people say one of the main differences between home ownership and renting is taxes... EITHER WAY you are paying the taxes, it is just itemized when you do a mortgage instead of just encapsulated in the blanket "Rent". When renting you are still paying it, you just do not get to deduct it.
.
In some rental markets this may be true, but it is by no means true in all. If the rent market is extremely tight, it is probably accurate, but less so as more units are available for rent or as banks make mortgage money readily available.

To wit, the rent my husband and I have charged fot the past four years did not cover our out-of-pocket expenses for the property until we diverted a huge chunk of our other savings to eliminate the mortgage (and thus, interest expense). We ate the cost because we wanted to leave open the option of returning to that home after getting out of the service. Now, after eliminating the mortgage, I figure we are netting a whopping $2K per year on the property. So yes, the renters are finally, in effect, paying the taxes on the place - but they weren't doing so for the three years prior that they were in the place.

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Originally Posted by Daekini
No down payment works if you are wise enough to buy a home that fits your budget. Figure out the payment that works for you and buy a home that will give you that payment. What's the difference between buying a $145K home with $X payment (including taxes, pmi, insurance) and buying a $200K home with the same $X payment? House size. Or neighborhood. As long as you have a fixed, prime rate, standard 15-30yr loan, and can tolerate a smaller home, why not do 100% financing????? What's the big deal???? I don't need a bigger home. Homes in my price range sell quicker here. I'd rather stay small and own than throw my money away - and yes that is what I said. I'd rather "maybe" get something back when I sell than "definitely only get my deposit back". Either way it's a crap shoot and only you know what is right for you.
I am not sure I understand your question here - it seems like you're comparing buying a 200K home with a "normal" down payment to buying a less expensive home with no money down. In terms of your net worth, to look at it thru velochic's lens, the major asset and liability items are organized differently, but ****;l have about the same bottom line, I think. With the 100% financing on the less expensive house, you have no equity, but the money that would have been the down payment on the 200K house is still one of your assets, it's just not fixed in the form of your house. The question I have is why you would go for 100% financing if you have a pile of money that could serve as a down payment. Even though mortgage interest is deductible, it's always better not to have an expense at all than to be able to deduct said expense. Surely I'm missing some relevant detail
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#70 of 117 Old 04-13-2007, 10:01 AM
 
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I don't have a pile of money to put down because I just paid off 40K in debt... otherwise I would. The question really boils down, for me, to whether I should rent and have no assets at the end of the day, buy now and work on making this home (which appraises for more than we're paying) an asset, or save up enough for 20% down and then buy. It would take 4 years for me to do that. The city I live in is experiencing major growth and home prices are steadily increasing. In fact, the house behind mine, which is smaller than mine, older than mine, and...well... ugly, sold for the same price I paid in under 2 weeks.

Every situation is different. Why can't I put the money I could save after paying my rent (same price as mortgage each month) or mortgage toward the principle? Then I'd be in the same place in 4 years as I would be if I waited 4 years in terms of equity in my home. But in 4 years homes in this area will be more expensive. Is my thinking totally bonkers?
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#71 of 117 Old 04-13-2007, 10:06 AM
 
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Nope, not directed at you. I hadn't really read many of the posts by you, to be quite honest. Your stance is clear.
I was related my experience with people who tried to talk us out of our choices to another poster with a simialr experience.
Sorry if you took it personally.
I have to say, buying our home with no down payment was a great thing for us at the time. People tried to warn us--I have yet to see anything negative come of our choice. It just gets to be a better decision as time wears on .
I didn't take it personally... your post felt directed at my comments because it said, (bolding mine)

"Yeah, too many people are so quick to hand out advice about *not* doing it. Well, we did an almost 0% down payment and utilized a program set up for educators (what I do/did). It worked out perfectly. We got a great rate, then, 2 years later refinanced for an even better rate and cashed out some of our equity.
I truly wish the people who *think* they know better would just let those of us who are trying to do our best learn from our own decisions. Not all of them are mistakes...sheesh!"

It sounded like you were getting upset that people tell you it's a bad idea to buy when you have to use these higgedy-pockety types of financing. It's sound advice. It's advice that I stated here. But it's just opinion, offered to be helpful and not harmful. Glad it worked for you. But the PROBABILITY of it NOT working out and defaulting on these types of loans is very, very high. That needs to be stated. And that is not opinion, that is fact. Good luck!
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#72 of 117 Old 04-13-2007, 10:27 AM
 
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Every situation is different. Why can't I put the money I could save after paying my rent (same price as mortgage each month) or mortgage toward the principle? Then I'd be in the same place in 4 years as I would be if I waited 4 years in terms of equity in my home. But in 4 years homes in this area will be more expensive. Is my thinking totally bonkers?
You're right that every situation is different. Think of it this way. What if right after buying a home, paying 100% (meaning you have no equity in the home), your income level is significantly reduced? Do you have an emergency fund to pay the mortgage while you improve your income situation? What happens if you have a major cost in your life? If you don't have any equity in your home and you don't have an emergency fund, you will lose your house. Especially right now when there is a mortgage crisis. The banks are not going to be so lenient.

Using creative financing works out great, if you're a lucky person... nothing major comes along that requires a major outflow of cash, nothing major happening to the house, no income changes. It works without a hitch for these people. It's those that are in these funny mortgage situations, who have unexpected things come up that are the ones that find out it's not a great idea.

That's why I keep saying it's SAFER to save the down payment, then buy when you get a sufficient pile. You never know what will happen in the future. My mom lost her house 2 years ago and my sister just lost her house.
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#73 of 117 Old 04-13-2007, 10:32 AM
 
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But it is possible to get a 100% loan without using "higetty-pockety" financing. Teacher programs frequently offer 100% financing without getting an 80/20 or high interest or ARMs. I for one am using a major bank with a good reputation and I'm getting a 5.325 fixed rate 30% loan. That's higgety-pockety? Not in my mind.

I think we actually agree, though! I totally agree that lenders are willing to loan people too much by using crazy practices. We could have gotten a loan for $110,000 more than what we were willing to buy. We couldn't have afforded the payment on that! I can totally see why people would be tempted. Homes in that price range are larger and nicer, but I'd never be able to enjoy it.

The problem is that too many people use sketchy lending practices to buy homes they can't afford. I think if you figure out what you can afford, have good credit, and get standard loans, you should buy. I think if you have bad credit you should work on your credit issues before buying so you won't be stuck with some higgety-pockety lending situation.
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#74 of 117 Old 04-13-2007, 10:40 AM
 
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Actually, I receive my deceased father's retirement. I will get it for the rest of my life and for the 14 years I've recieved it, the monthly benefit has gone up every 6 months due to cost-of-living increase. It's stable. It's more than my mortgage, pmi, insurance, taxes combined. DH is a teacher in a public school system that hires 150 teachers each year. He has a Master's degree (and so do I, in biology). We should be okay - but you're right, you never know what can happen.

As I said before, every situation is different. I do appreciate your making me think this through, though. It's hard to have someone tell you not to do something you're inclined to do, but it's important for people to really be ready. Actually, all this made me think we should ask for a home warranty, just to give us a year or so of peace of mind and increase our cushion (yes, we do have a few $K in savings for that). The sellers said yes. So, thank you! I probably wouldn't have asked for a warranty had it not been for this thread. Not that home warranties were mentioned, it's just that I didn't want to deal with some home repair crisis within the next year.
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#75 of 117 Old 04-13-2007, 10:58 AM
 
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Sounds like you're thinking through things and you have some very secure income. Great! Best of luck!!
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#76 of 117 Old 04-13-2007, 01:12 PM
 
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Our area has experienced an insane rise in the costs of housing in the last 5 years. The article would be true here IF we were just moving into our area today. However, we purchased our home 7 years ago...for 124,000...now it would sell for around $315,000. We have no desire to move and we have a nice 15 year mortgage (we refinanced about three years into our first loan...when the interest rates plummited and decided to go for a 15 year that time as we knew we'd be here for a while LOL). And, since they are capped at the amount they are able to tax you on from the time you purchase the home, we pay about $2,200 a year in taxes, which neighbors who just moved in for a similar home pay $6,000. It was just luck and timing for us in purchasing when we did. I used to joke that if I'd know this back then (what the market would do) I would have gotten a bit bigger of a house...but now I am actually happy that we got this size for other reasons.

It's a good size house in a nice quiet neighborhood. Renting a house this size down here would be about $2,200 a month. We're paying half that in mortgage/taxes/insurance each month. And, we have a huge chunk of equity!

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#77 of 117 Old 04-13-2007, 01:33 PM
 
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We are closing on our first house on monday (yeah!).

We decided to buy because we are paying as much for a mortgage, as we would for rent.

We figured that in 5 years, we will get our money back from a sale....even if we made less then what we paid for it. But rent money would just be gone in the wind.

Also, hubby has a firm contract, so we have the stability of knowing that there is money coming in.

However, without firm contracts, buying would be more scary and infeasable for some people. Losing a house due to the inability to pay....would be horrible.

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#78 of 117 Old 04-13-2007, 11:02 PM
 
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Young people have a sense of entitlement about owning a home RIGHT NOW, when really they need to sit back, think about it, consider all aspects of homeownership, and then hunker down and SAVE for the down payment.
Don't you mean SOME young people?

We have 0 desire to buy right now. However virtually everyone we know disagrees and are really pushing us to buy. It's making me a little :

In no particular order, some of our reasons are:
Our credit is not good. We got in over our heads several years ago. We've dug our way out, but our credit scores are still slowing recovering. As a result, we've decided to go debt free. I've still got some student loans we're working on, but no other debts. We own our cars outright even. We don't have 6+ months of living expenses saved up yet. So if something terrible happened, we'd likely end up losing the house. At least renting, we'd have nothing rather than a pile of debt and nothing. The house we're moving into in a few weeks is a 4 bedroom + den in a good school district. For what we're paying in rent coupled with our credit scores, our standard of living would take a serious hit if we bought. And finally, the #1 reason, we don't want to stay here. We'd like to move in 2-3 years max. Then we'll rent for 1-2 years to make sure we're really happy wherever we end up before buying. At that point, assuming our credit is good again and we have a decent down payment, we'll consider buying. We're more free spirit types though, so I'm not sure we'll ever feel like tying ourselves down that much.
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#79 of 117 Old 04-14-2007, 12:10 AM
 
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Originally Posted by velochic View Post
Young people have a sense of entitlement about owning a home RIGHT NOW, when really they need to sit back, think about it, consider all aspects of homeownership, and then hunker down and SAVE for the down payment.
Us young people, eh? What do we know? Apparently we all just sit around and think we are entitled to everything. Never mind the fact that many of us work our tails off, save the best we can, make good judgements, educate ourselves, and work darn hard to buy a house. IRL I do not know one single person-young or "not young" who just has jumped into buying a house. May just be the people I know? But not all us "young people" are hankering for debt and homelessness.

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#80 of 117 Old 04-14-2007, 02:24 AM
 
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I'm not young!!! But I did enjoy feeling like some of the "youngster" comments were directed at my 35-year-young self.

I think you've got things mixed up, maybe it's us old folks who are tired of renting that buy homes using loans from unscrupulous lenders!
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#81 of 117 Old 04-14-2007, 02:32 AM
 
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Originally Posted by ShaggyDaddy
Not trying to lash out at anyone really, but it drives me crazy when people say one of the main differences between home ownership and renting is taxes... EITHER WAY you are paying the taxes, it is just itemized when you do a mortgage instead of just encapsulated in the blanket "Rent". When renting you are still paying it, you just do not get to deduct it.
But my landlord can spread his property taxes out over many tenants, so that each just pays a little bit, hidden in the rent. If *I* were paying property taxes on a single family home, those taxes would be significantly more than whatever I am paying now in my rent. In some of the neighborhoods we'd consider buying in, for instance, people pay as much per month in taxes as we currently pay in rent.

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#82 of 117 Old 04-14-2007, 02:44 AM
 
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And, since they are capped at the amount they are able to tax you on from the time you purchase the home, we pay about $2,200 a year in taxes,
Yikes, that is still a lot.

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#83 of 117 Old 04-16-2007, 06:23 PM
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I don't have a pile of money to put down because I just paid off 40K in debt... otherwise I would. The question really boils down, for me, to whether I should rent and have no assets at the end of the day, buy now and work on making this home (which appraises for more than we're paying) an asset, or save up enough for 20% down and then buy. It would take 4 years for me to do that. The city I live in is experiencing major growth and home prices are steadily increasing. In fact, the house behind mine, which is smaller than mine, older than mine, and...well... ugly, sold for the same price I paid in under 2 weeks.

Every situation is different. Why can't I put the money I could save after paying my rent (same price as mortgage each month) or mortgage toward the principle? Then I'd be in the same place in 4 years as I would be if I waited 4 years in terms of equity in my home. But in 4 years homes in this area will be more expensive. Is my thinking totally bonkers?
I understand better now, and I can see why you seem frustrated by advice saying "don't buy without a downpayment" when it seems like such advice will simply shut you out of homoeownership forever: if the market is appreciating more rapidly than you can save, you would never get enough to buy something of same or similar quality of what you are renting. It makes sense to want to catch some of that capital appreciation.
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#84 of 117 Old 04-21-2007, 01:18 PM
 
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After many years of research and much contemplation, I have decided to put the money I would have used to buy a house into mutual funds, instead.


Every situation IS different, as a PP mentioned, and here's why I chose what I did:

I have no desire to own a home simply for the purpose of owning a home. I believe that my stability is within my SELF and not a building ~ I take it with me wherever I go.

On the subject of a house being an asset ~ I see that as equivalent to its being a liability.

I much prefer the fluidity of mutual fund investing. If something the money's invested in is going south, it can be rerouted elsewhere far more spontaneously and more easily than real estate any day.

I love the predictable-ness of paying rent. In my 18 years of renting experience, I've only once had the rent payment requirement increase in any of those rentals (and there have been over a dozen rentals during that time). The one that did increase is my current rental and it was only after 5 years of renting. . . and still only came to a $30 increase. OTOH, owning carries a lot of responsibility and sometimes surprises (ones that should be expected, however). I love that I get to call the landlord when something's not right in my house.

When scoping out potential rental houses, I look far more seriously at the landlord than the property. Professionalism comes first, to me, and I've educated myself about my rights as a tenant.

There are some tricks to keeping my rent lower, too. Currently, I have an amazing rental situation ~ a wonderful home with a big backyard which the monthly rent for is priced far lower than the mortgage would be in the neighborhood I'm in.

I am sure to de-clutter regularly so that I can continue on the exciting path I'm on. ~ I like putting more of my rental dollars into having big backyards and less house. Having less stuff assists with that and also makes moving easier. I've noticed that when I've lived in larger spaces, I've "found" the stuff to fill it up with if not careful. It feels heavy and I am attracted to lightness.


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#85 of 117 Old 04-21-2007, 02:10 PM
 
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I agree that the right landlord and yard make all the difference. We've rented for over a decade and our current landlords are the best so far. I've had a much better experience renting from individuals who manage their own properties than with agencies, and from people with only one or very few occupied properties than from people who have many properties to attend to.

We're finally buying, and we're actually purchasing the home we are currently renting. It's been well taken care of since the owners were the last people who lived in it, it has a huge yard (comparatively), and since we don't have to go through an agent and the owners bought it as a foreclosure, we're saving a lot of money. I think renting until the ideal situation arises has been the best option for us.
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#86 of 117 Old 04-21-2007, 02:13 PM
 
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May May, while I see where you are coming from regarding rent, the issue that I have is paying a monthly bill for my housing once I'm in retirement.

I, too, am an advocate of mutual fund investing. I just don't think that owning a home is a poor choice. I think, in fact, that you can use a mortgage to leverage your investments in a safe and long-term asset allocation.

But ultimately, I am in a secure financial situation, we have settled, and we are doing well in regards to retirement. I think home ownership fits well into that scenario. I can pay off my house at any time I want to, so there is also security in that aspect.

Renting is good for many people, but I disagree that you should not own a home to own mutual funds (a home is part of a well-balanced portfolio) nor do I believe it's a liability. I think there are a lot of reasons to rent. Glad you've found the comfortable place to be in regards to that. What will you do when you retire, though? Continue to pay for housing?
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#87 of 117 Old 04-21-2007, 03:25 PM
 
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ITA with May May. We rented a previous home for 8 years and never had a rent increase. I think that home owning is largely emotional and any that there is a huge assumption of status in being a home owner by individuals and by institutions. I feel that status is also false and really has no association with the reality of peoples value or worthiness. I have owned before and IMO there are HUGE drawbacks, but I probably already posted those earlier in the thread and I'm too lazy to check
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#88 of 117 Old 04-21-2007, 04:10 PM
 
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Originally Posted by Arduinna View Post
ITA with May May. We rented a previous home for 8 years and never had a rent increase. I think that home owning is largely emotional and any that there is a huge assumption of status in being a home owner by individuals and by institutions. I feel that status is also false and really has no association with the reality of peoples value or worthiness. I have owned before and IMO there are HUGE drawbacks, but I probably already posted those earlier in the thread and I'm too lazy to check
I totally agree with the fact that renting has nothing to do with net worth. My dh's net worth was way up there and he was a renter before he married me (homeowner).

I know renting is totally right for some people.

My question, though, is what people plan to do in retirement if they are still required to pay for housing. It's usually a big chunk of money and often not feasible for those who are retired.
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#89 of 117 Old 04-21-2007, 04:26 PM
 
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My question, though, is what people plan to do in retirement if they are still required to pay for housing. It's usually a big chunk of money and often not feasible for those who are retired.
My understanding of the argument is that if renters have indeed accumulated an equivalent net worth by the time they are retired (with mutual funds replacing home equity), they could always buy a house or apartment outright at that point, or they would have a lot of cash to pay for renting during retirement.

I think the success or failure of that strategy would depend on how fast property values rise in the future, vs. the stock market.
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#90 of 117 Old 04-21-2007, 04:43 PM
 
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Arduinna, I totally agree with you about the emotional aspects of home ownership being predominant, as well as your points about status vs. self-worth. It's so true.

Tamagotchi, I am also in agreement with your ideas about retirement, with regard to velochic's concern.

I find mutual funds to be a way better "asset" (largely due to their fluidity) and I love that there is no liability in them. I also currently receive the immediate benefit of interest from my investments.



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