Comments on: When Owning a Home Isn’t Always All It’s Cracked Up to Be

By: Rob in Madrid

Rob in Madrid — Sat, 10 Nov 2007 10:47:27 +0000

Generally it’s a better to own than to rent. In some places rent is much much cheaper than owning. Biggest problem is for first time home buyers is to get in the market is a huge stretch. Very very few people have a 20-25% down payment on a house.

I’ve seen long discussions elsewhere about the merits or renting vs buying and generally regardless of numbers most people want to own. (myself included)

What puts me off of owning (at least in Canada US and UK) is property taxes upkeep etc. Generally in Europe property taxes are very very low.

By: Jeremy

Jeremy — Wed, 07 Nov 2007 15:22:31 +0000

Great comments, everyone. Just an update on the furnace, we were fortunate enough to end up only paying about $200 to fix it. The igniter cracked and wasn’t sparking.

By: The Money Post

The Money Post — Wed, 07 Nov 2007 11:47:20 +0000

In addition to unexpected expenses, you have to keep in mind lost time spent on upkeep. I probably spend around 10 hours a week, improving, maintaining, and fixing little things around the house. I’m happy to own, but time = money.

By: Dan

Dan — Wed, 07 Nov 2007 04:48:17 +0000

Long term capital appreciation is all about planting as many seeds as you can, of which a house is one. Bonds, stocks, cash, your career are others. spread your money out, some will grow better than the rest but just like a garden you can’t always know which area will bear the best fruit. hedge your bets and everything will work out.

oh, just don’t go too crazy on the house. I see to many fellow GenXers in silicon valley buying way to big of a house. We bought smaller than we could have afforded, have still seen good appreciation and live with mortgage that wasn’t all that much more than our rent (yes, all the rest of the stuff adds up but then again 50% of my rent didn’t go back to me).

best chapter of whether to rent or buy is chapter one in “home buying for dummies”… read it and do the excercise on TCO about 30 pages in.

By: Matthew Paulson

Matthew Paulson — Sun, 04 Nov 2007 21:35:14 +0000

I think homes end up not being a good thing for a lot of people since they buy one before it makes financial sense to do so… Barely anyone buys a home with a 20% down payment anymore, and most people spending the maximum amount of money their lender will let them…leaving them little to no cash to take care of the things that just happen when you own a home.

By: Eric

Eric — Sun, 04 Nov 2007 15:56:50 +0000

@Bill – I disagree with your assessment regarding square footage. To rent the house I live in would cost me about $1300 a month. My house payments are $1050 (including taxes and insurance). If I had to buy the house again at the current value, it would wind up about $1250 a month. It’s more expensive to rent in my area than it is to buy. And the rents are still going up.

By: Bill

Bill — Fri, 02 Nov 2007 21:35:45 +0000

On a square foot basis, it’s always cheaper to rent than own.

As for investing, residential real estate has had a long-term return of only 1-2% above inflation, not much of a return compared to financial assets.

People own homes because they want the freedom to do things they can’t do with a rental.

But understand owning a home is not inexpensive – typically you’ll spend 1% of the home’s value annually just on maintenance.

By: aeko

aeko — Fri, 02 Nov 2007 18:01:54 +0000

I am three months away from making the last mortgage payment. Thinking how I can save the money to increase my emergency fund. The furnace died, the plumbing started to leak, like wise the roof. To the tune of over $20,000. Which I don’t have in savings and will need to borrow. Taxes have increased every year, insurance for the house has doubled in price since I bought the house 18 years ago.

By: John Boyer

John Boyer — Thu, 01 Nov 2007 16:53:14 +0000

When we rent don’t we pay for all costs of ownership, plus a profit for the owner? 30 years later all we own is our rent receipts. Too, in most cases doesn’t our rent go up, at least, on a yearly basis ? An apartment I lived in when I was 30 was $65.00 a month, now, that same apartment is over $500.00 a month and when I was there it took a stick of dynamite to get the landlord to do anything. Maybe your landlord is the “best in the world”, and does whatever is necessary, quickly, but I would say, “YOU are paying for it”! — john

By: Rocky

Rocky — Thu, 01 Nov 2007 13:18:17 +0000

I am a mortgage lender and have been for over 9 years. I see people “financially naked” when we make an application for a home loan.

My observation is that most people have no clue about finances other than making payments on homes, cars and consumer revolving accounts. That is sad.

Wealth, as defined by Robert Kyiosaki, is not having to go to work to pay the bills unless you want to. Getting out of the Rat Race means having alternate sources of income so you don’t need to work, unless you want to, to pay your cost to live. (Personally, I love to work and add value to those around me).

If you can own a home with the idea of one day paying it off, then you can arrive at a point where, with wise personal spending, you can live an enjoyable life and have a pile of money in investments.

If you rent your abode, then it is like making a mortgage payment that is “interest only”, never paying down the balance, and not getting any tax advantage either. Your rent payment is paying for taxes, insurance and maintenence but due to economies of scale, the cost of maintenence is lower per person. But the insurance and taxes remain the same per unit of value of the property.

I make home loans for a living. I believe a home loan is needed only because most people don’t have financial resources to pay cash. Pay the mortgage off as soon as possible or pay it down as quickly as possible to save on the amount of interest you pay.

If you were one of the rare people who kept a home for 30 years, then you will pay for the home 3 times over. Why would you pay $600,000 for a $200,000 home – even with inflated dollars that is you giving twice your time/energy for the home.

To pay $1 in interest for the purpose of saving 15 to 38 cents in taxes doesn’t seem to me to be a good deal either. Pay the average 25 cents to the taxes and keep the other 75 cents you were giving to the bank. Instead of paying interst to the bank, invest in the bank and let them pay you interest.

Is this ‘practical’? It certainly takes some ‘doing’.

People in other countries live with family members while saving money for a home and many own their homes with no debt. Rarely do they worry about money or debt obligations.

I refinanced my sister’s home to a 15 year note at a low rate. She is making extra payments to pay it off in 7 years and while she is doing this, she has no car payment, lives close to work and rides a scooter, and invests money each month.

She is a single mom and works as a nursing assistant at a hospital. She also believes in working to her fullest at work, extra hours and making lots of friends.

I encourage people to own homes but ditch the mortgage as soon as you can.

When you have no to low cash outflow, you need less in flow and are not at the mercy of the job market, economic ups and downs and you don’t need to hoard money out of fear of old age poverty.

I was once laid off from the high tech job I had; I had no mortgage or car payments at the time. I was quite relaxed about the whole layoff affair. The guy being walked out the back door next to me had 5 cars and an expensive mortgage. The guards had to help him stand as they walked him out as he was in such shock and fear – at the age of 55.

The (wo)man without money is at the mercy of the world.

Two rules for happiness (from a Chinese engineer I once knew):

1. Always be happy with what you have
2. Always have enough

Be happy and be at nobody’s mercy.