Mortgages are a pain in the ar*e! Way ot

[Les Paul Lover]

I haven't been able to find someone to explain why it's better to own a house rather than rent. Yes, I know that you are throwing your monthly payments away, but there's also the other side to the coin. Huge down payments, maintenance costs (will always be more than your expectations unless the house is new). Plus upkeep. Not trying to say don't buy a house, but I'm just wondering if you considered renting.

And you've answered your own question.

After 15 to 25 years of paying monthly instalments that, after years, become less compared to ever increasing rent, you pay off your mortgage. And then, you may not believe it , but you live in a house rent free/mortgage free.

Thats why people do it.

[Borderline Productions]

Welcome to a system that is broken. Banks will only lend you money at a decent rate with fair conditions if you already have the money. In the US the banks were bailed out, but the banks are just sitting on the money. Even people who can easily afford a mortgage can't get one. The banks are saying there is too much uncertainty to lend out their money (that is the money the government gave them).

So, because most people cant get or afford a mortgage, there is a high demand for rental properties, so rents are higher than they used to be. If you are young with no money, you are screwed. Now they are talking about getting rid of the tax deduction for mortgage interest that is paid. I guess my generation will be the last for which home ownership actually happened for most people.

Save your money, wait until you have 20-25% to put down as a down payment. At least with a rental you can drop the lease and move, with a house you have to find a buyer. The two happiest days of home ownership are the day you buy it and the day you sell it.

[oranginator]

I haven't been able to find someone to explain why it's better to own a house rather than rent. Yes, I know that you are throwing your monthly payments away, but there's also the other side to the coin. Huge down payments, maintenance costs (will always be more than your expectations unless the house is new). Plus upkeep. Not trying to say don't buy a house, but I'm just wondering if you considered renting.

And you've answered your own question.

After 15 to 25 years of paying monthly instalments that, after years, become less compared to ever increasing rent, you pay off your mortgage. And then, you may not believe it , but you live in a house rent free/mortgage free.

Thats why people do it.

15-25 years is damn long.

The only way you will have a paid off house in America is if:

* You live in a piece of crap house.
* You live in the same home for 25-30+ years.
* You are filthy rich.

[Thinline_slim]

If you want to be rich, don't buy a house. That's my advice.

Buy a house when you can pay cash.

Buying a house with cash can be a great plan but for me it's not the ultimate plan. Right now, if I had the cash to pay off my house completely I still wouldn't do it. I still own a sizable chunk of mortgage but it's only at 4.875%. In 10 years it will still be 4.875%. So look at it in terms of the potential cost of that dollar.

If I take that dollar and pay off the house I avoid 4.875% cost right? But if I can invest that dollar and make conservatively 6% I'm getting a better return on that dollar by 1.125% but that's compounded annually. As long as I can do better in investing than my mortgage in the long run, I'm better off holding a mortgage.

Just a different take on it. But I will agree, with the amount of BS that is the market these days going completely cash does sound appealing.

15-25 years is damn long.

The only way you will have a paid off house in America is if:

* You live in a piece of crap house.
* You live in the same home for 25-30+ years.
* You are filthy rich.

Those points are not entirely true BUT I don't disagree with your original post either. Home ownership is not for everyone no matter what politicians say and that "American Dream" of owning your own home is partially what led to the bubble.

There are plenty of middle class folks, who are not rich who own their own homes or with a mortgage these days. Once you buy a house you do start paying down the principle immediately although it's such a small amount at first but that grow over the years. So in 15 years or so you would have far more equity in your home than you started and if you needed to get into a new(er) house you would sell what you have, and use the equity from that home as the down payment on the next. But it's getting on that train to start which is the most difficult part and you're not necessarily going to come out ahead. But in my mind in 15 years what will be your rent vs your fixed mortgage and at the end of 30 years you're just paying property taxes vs an ever inflating rent.

That said, I have a very good friend on Orange County CA who could buy a house out in that county but numbers wise it doesn't make sense. Not that they can't afford it but his rent is about 2/3 of what his mortgage would look like. That's pretty crazy.

[Bink]

I'm 31. First time buyer and to have a 5% deposit with all the extra funds (stamp duty, solicitors etc) means about £10k deposit. Sounds ok yeah?
Well you need a parent guarentor who can gaurentee 25% of the morgage! The house we are looking at is £170,000 which is ok but how can I ask my mum to be the gaurentee? If we save 10% we need about £19k deposit!

Has it always been this tough to get on the ladder?

Frustration is not the word! I blame the misses too as she was looking at houses and found one that matched everything we want need

Grrrrrrrrrrrrrrrr!

Yes and no. It fluctuates. I'm on my 3rd house right now (2 in the UK and recently one here in the States - 2003, 2006 and 2011 respectively). This time round was by the far the toughest in terms of providing information etc. I only put down 5%, primarily because the mortgage is one of the cheapest ways of borrowing money (I'm on 4% for 30 years).

It is frustrating and it's hard to get the deposit together but IMO at least, it's worth it. Nothing more satisfying than a place to call your own, where any work you do is directly helping you and not a landlord.

One thing I would say is don't underestimate how much furniture etc costs if you're moving up in size. You may think you're happy doing things bit by bit (which is the best way to do it) but no one likes having an empty room for 2 years because you can't afford to put furniture in it.

On having your Mum as the Guarantor - if you can afford it, I wouldn't hesitate to have her do it for you. I had my Dad as a Guarantor when I bought my first flat whilst at Uni and paid the mortgage myself. The market's a little different to back then (I bought in Glasgow in 2003 and it went up 50% by the time I sold it 2 years later) but I truly think it's worth investing in a house over renting. The earlier you start doing it, the earlier you will pay off the mortgage and you'll want it paid off by the time you want to retire.

Things are a little different in the US though where buying isn't always the best option. I live in Houston for example and pay $1k/month on property tax. Even if I clear my mortgage, I still have to pay that and that's quite a big hit each month, so there are some instances where it may be cheaper to rent than to buy.

On having borrowed the most I could borrow previously (although my salary was always going to rise as I bought within a year of my first 'real' job) I would recommend that you keep it to no more than 1/3rd of your monthly salary. It's a nice place to be in terms of affording it. I borrowed 4.25* salary on my second house and it was tighter than I would have liked, although we pulled in our belts and managed just fine, it is nice to have a little spare money to play with.

Good luck to you!

[WAWBanks]

Currently trying to save up a deposit. Not looking forward to it!

[Borderline Productions]

Another option is to get your parents to lend you the money to get you to the 20% downpayment. The upside of this is that they are not on the hook for the full mortgage and you will get better terms on the mortage (go as short-term as possible).

The downside is that you parents would be taking the risk of being a second mortgage, meaning that if something happens the bank gets the house and your parents only have your promise to pay them back. It is in some ways more risky for them.

Hopefully, the bubble is over and you won't go underwater on what you buy.

[Blainy]

Would be nice to think the "bubble's over" (is that a pun on the greek economy? , the average 'Bubble' is almost certainly in a bit of bother!) but I think it's gonna be a while yet, with some more pain along the way.

[OU818]

Where I live I pay $2k a month rent (between 2). The average mortgage in greater Melbourne is $3k a month. The average mortgage in my suburb is upwards of $4k... I did the maths with crayon whilst asleep... I'm good with renting

[Randy Bass]

... I did the maths with crayon whilst asleep... I'm good with renting

That's a good way to end up with a rainbow-colored toilet. Good thing you're renting !

[jason41224]

Welcome to a system that is broken. Banks will only lend you money at a decent rate with fair conditions if you already have the money. In the US the banks were bailed out, but the banks are just sitting on the money. Even people who can easily afford a mortgage can't get one. The banks are saying there is too much uncertainty to lend out their money (that is the money the government gave them).

So, because most people cant get or afford a mortgage, there is a high demand for rental properties, so rents are higher than they used to be. If you are young with no money, you are screwed. Now they are talking about getting rid of the tax deduction for mortgage interest that is paid. I guess my generation will be the last for which home ownership actually happened for most people.

Save your money, wait until you have 20-25% to put down as a down payment. At least with a rental you can drop the lease and move, with a house you have to find a buyer. The two happiest days of home ownership are the day you buy it and the day you sell it.

but that's only half the story. before the bubble came crashing down, you could get a home loan easier than you could get a car loan (my friend was LITERALLY rejected a car loan because his credit was so poor, the next week he turned around and bought a house, all in 2006 ) that's just one of the many factors that burst the bubble. can't really blame the banks for overreacting a little bit until the market shores up.

but since this isn't a political debate (across continents no less), the best thing that can get you into a home is hard work, and realizing nobody's out to screw you. if you're wise (meaning, putting your feelings and "wants" far behind your priorities and "needs"), you might get into a home much quicker than you think, and with a lot less debt/payments staring you in the face. hang in there.

[savage8190]

I actually did the math with a fellow finance guy and it works out way better for me to rent. I pay relatively little for rent because we rent the bottom half of a relatives house. Its about 1/3 of what I would pay for a mortgage (housing costs are crazy here). If I were to continue to rent, accounting for inflation, and save the difference between that and what my mortgage would be, I would have WAY more money saved than that theoretical house could possibly be worth. That's not even taking into account maintenance...

The wife and I are sort of on the bubble. We'd like to own our own place just because it would be ours, but at the same time we could save that money and retire with some great vacation property somewhere that it doesn't rain all damn year...plus I hate yardwork .

[irish_admiral]

It's all a tradeoff though I guess...

The way a mortgage is structured and the relative cost of renting means that you could come out with a different decision elsewhere. Eg. in London, because of rising house prices, and short supply, most people rent. However the rents get pushed up to the point where it's almost silly to rent when you could buy and get a mortgage paying nearly the same.

The other factor to bear in mind is that - in general, in the long term - house prices increase. Not only are you slowly buying a house as you pay your mortgage, the value of that house is increasing, all things being equal.

So you just need to consider the differentials: if it makes more financial sense for you to rent for 30 years, and save up the difference between your rent and what you'd pay for a mortgage, then put that down as equity on a house (if you want to do that), then go ahead. You just need to consider the inherent increase in value of the property as part of that return (can you get a better rate putting your money in the bank and saving?), being mortgage-free in future, and also your own fiscal discipline? Will you really save all the money that you're not spending whilst renting and put it aside to a house purchase in future?

There's a reason why - in the UK at least - the majority of people are homeowners. And it's because it currently makes better financial sense to buy. Or it has done for years...

[Blainy]

...and will do in the future. The likelihood is that the value of the house will double in real terms over a 25 year mortgage, perhaps triple. That gives you financial security - as long as you've paid the mortgage!

[baytamusic]

There are other things you can do with money than play the market or put it in low interest CDs and bank accounts. Like for instance, opening a business!

Sounds like the UK is a little different than the US. I can rent my place (1000sf) for $1000 per month plus utilities ($200 month average) on the north side of Chicago. I have a front studio room that is zoned commercial that is about 375sf where I have my recording studio and office for my design business. The back half of my place is a 2 bedroom apartment. I'm able to write off $500/month rent on my taxes due to my place being zoned separately in the front and back. I'm also able to write off half my utilities. So basically I'm getting a $700/month tax write off with no property tax responsibility. If I were to try and buy a place in Chicago equivalent to what I have in a good neighborhood it would probably be in $300,000 range, plus property taxes, plus upkeep. My landlord told me my rent payment basically covers his property taxes, and his son lives in the flat above my place. A funny side note is he told me he bought this building in the '80s for something like $80,000.

So basically, in the city that I live in, it makes 100% sense to not buy on a mortgage. Rent prices are SO low right now here that you can rent for fractions of what a mortgage plus property taxes and upkeep would cost. That leaves a lot of extra money on the table for me to buy assets (recording gear) and save here and there. And the big one is, I don't have the stress of debt.