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SVreX
SVreX MegaDork
12/13/16 1:16 p.m.
ProDarwin wrote: My point was never to show that renting is cheaper than buying or whatnot. It was more to show that "I've put a roof over my head for 25 years for the cost of utilities" is flawed financial reasoning.

Hmm...yeah, sure missed THAT one. That's not at all what came across.

z31maniac
z31maniac MegaDork
12/13/16 1:59 p.m.

I'd also add, I wouldn't buy anything I couldn't comfortably afford on a 15 year mortgage. Much less interest paid, and start building equity MUCH faster.

Keep in mind insurance will likely increase every year.

I purchased my old house in Sept '09, house was in great shape with a new roof, etc. By the time I let my ex-wife refinance (and remember we had no claims on the home from Sept 09-June 2015) the insurance had more than doubled. A property tax increased once it was reassessed at the higher sale price, which took about 18 months to work through the system.

Duke
Duke MegaDork
12/13/16 2:08 p.m.
SVreX wrote:
ProDarwin wrote: My point was never to show that renting is cheaper than buying or whatnot. It was more to show that "I've put a roof over my head for 25 years for the cost of utilities" is flawed financial reasoning.
Hmm...yeah, sure missed THAT one. That's not at all what came across.

OK, I admit that was a gross simplification - but so is "buying a house is a financial suck that will drain your bank account, your time, and your will to live."

EvanB
EvanB UltimaDork
12/13/16 2:12 p.m.

I just closed on my first house this morning. I'm excited to have my own home, not sharing a wall with the neighbors, have a garage and yard to myself and have a monthly payment less than rent.

Ian F
Ian F MegaDork
12/13/16 2:37 p.m.

Also... rent tends to go up. Your mortgage generally doesn't, other than real estate taxes, which in my experience, tends to not increase that much year-to-year.

Get a loan spreadsheet with an amortization table. Then you can really see for yourself how much an extra $100 or $200 every month will make towards paying off the mortgage and saving on interest. In the beginning, the interest portion will be more than the principle, so that extra principle makes a difference.

The interest paid each year will slowly decrease over the course of the loan. As a result, the tax deduction will also decrease. The last couple of years of my mortgage the deduction was only a few hundred dollars. The first year of my taxes without the interest wasn't much different.

It might depend on the bank, but the interest on my mortgage was calculated off the average daily balance on a specific date each month. Lower that average and the applied interest is a bit less. What that meant to me was to make the payment ASAP, regardless of the actual due date. I would know which paycheck would be allocated towards the mortgage and made the payment on that pay-day, sometimes two weeks before the actual due date. The result was a lower average balance until the next interest calculation was applied. Yeah, only a few $, but it adds up. Plus, it was good for budgeting since I didn't have to worry about the money being in my account, despite being already "spent".

Being in your 40's, not having a mortgage and only having to worry about the taxes (in my case, only a few hundred each month) is a wonderful feeling. That said, I know of a few folks who lost their house after paying off the mortgage because they were so used to having the taxes paid out of the escrow account, they forgot to budget for the yearly tax payments (in my case, Twp on 4/15 and school taxes in Sept).

ProDarwin
ProDarwin PowerDork
12/13/16 2:42 p.m.
Duke wrote:
SVreX wrote:
ProDarwin wrote: My point was never to show that renting is cheaper than buying or whatnot. It was more to show that "I've put a roof over my head for 25 years for the cost of utilities" is flawed financial reasoning.
Hmm...yeah, sure missed THAT one. That's not at all what came across.
OK, I admit that was a gross simplification - but so is "buying a house is a financial suck that will drain your bank account, your time, and your will to live."

That's fair

Hal
Hal UltraDork
12/13/16 3:24 p.m.

Interesting reading about various house buying experiences. Since the wife and I bought our house we have:
Redone the kitchen twice, first time was $3K(did a lot myself), second time was $17K for a custom job.
Replaced the furnace/AC once for $5K (getting ready to do again in 2 weeks at $15K).
Put on 2 small additions at ~$30K each including new roofing.
Redid driveway and sidewalks for ~$10K.
Refinished floors for ~$6K.

We bought the house in 1976 for $42K and my realtor friend would love to get it to sell with a starting price of $380K. We love the house and will probably live here the rest of our lives.

pheller
pheller PowerDork
12/13/16 3:54 p.m.

Buying a home today is different than 30 years ago. I can't imagine that homes that are selling for $300k today will be worth a million in 30 years. Wages just aren't keeping up.

It's part of the reason that the "Boomer" generation is the among the most wealthy, all that appreciation in the housing market is concentrated to a specific generation.

Gearheadotaku
Gearheadotaku PowerDork
12/13/16 6:17 p.m.
914Driver wrote: BTW, if you're a veteran bring your DD-214 to your county office building or the VA; I didn't pay property taxes for the first 10 years.

Please explain if you can. I'm not a vet but would sure like to pass this along!

ProDarwin
ProDarwin PowerDork
12/13/16 6:46 p.m.
pheller wrote: Buying a home today is different than 30 years ago. I can't imagine that homes that are selling for $300k today will be worth a million in 30 years. Wages just aren't keeping up. It's part of the reason that the "Boomer" generation is the among the most wealthy, all that appreciation in the housing market is concentrated to a specific generation.

True. But also interest rates on houses bought 30 years ago were nuts. Quick googling shows ~10%. So many of those boomers poured a TON of interest dollars into their home.

Total value of a 300k 30yr would be around 950k at that rate.

dculberson
dculberson PowerDork
12/13/16 9:14 p.m.
pheller wrote: Buying a home today is different than 30 years ago. I can't imagine that homes that are selling for $300k today will be worth a million in 30 years. Wages just aren't keeping up. It's part of the reason that the "Boomer" generation is the among the most wealthy, all that appreciation in the housing market is concentrated to a specific generation.

I'm not sure it is that different. Interest rates are much lower of course. And I bet if you asked someone 30 years ago if their house would be worth $300k in their lifetime they would have said no. Or even hell no. There's just no way to predict these things.

EvanR
EvanR SuperDork
12/13/16 9:35 p.m.
Ian F wrote: The interest paid each year will slowly decrease over the course of the loan. As a result, the tax deduction will also decrease.

The few younger homeowners I've talked to don't even consider the factor of interest deduction. It was truly a thing when mortgage rates were 10%. But at 3.5% rates, the mortgage interest deduction is only truly valuable for the first 3-5 years.

MDJeepGuy
MDJeepGuy New Reader
12/13/16 10:16 p.m.

You guys can turn anything into an argument.

Pheller, congratulations, Flagstaff is a great place and that house looks great. Ignore the rest of the bs :)

SVreX
SVreX MegaDork
12/14/16 6:25 a.m.

In reply to ProDarwin:

35 years ago Carter was in office. Interest rates hit 22 percent.

pHeller, I think the take away for you behind this arguing, is that you have made a good move, and it will end well for you. Even for those of us who have seen bad things, it has almost always ended OK for homeowners.

I get your nervousness, but you will be OK. Congratulations.

Ian F
Ian F MegaDork
12/14/16 6:40 a.m.
EvanR wrote:
Ian F wrote: The interest paid each year will slowly decrease over the course of the loan. As a result, the tax deduction will also decrease.
The few younger homeowners I've talked to don't even consider the factor of interest deduction. It was truly a thing when mortgage rates were 10%. But at 3.5% rates, the mortgage interest deduction is only truly valuable for the first 3-5 years.

True.. the interest on my mortgage was about 5.5% (bearing in mind, it was paid off 3 years ago). By the time rates were lower than that, the balance was so low the refinancing costs wouldn't have made it worth it.

MDJeepGuy wrote: You guys can turn anything into an argument.

We prefer to call it "a passionate discussion."

ProDarwin
ProDarwin PowerDork
12/14/16 7:18 a.m.
MDJeepGuy wrote: You guys can turn anything into an argument.

No we cant!

z31maniac
z31maniac MegaDork
12/14/16 7:32 a.m.
ProDarwin wrote:
MDJeepGuy wrote: You guys can turn anything into an argument.
No we cant!

I came in here for an argument. Oh Sorry. This is abuse!

Duke
Duke MegaDork
12/14/16 7:44 a.m.

That's not an argument. You're just automatically gainsaying any statement I make!

volvoclearinghouse
volvoclearinghouse SuperDork
12/14/16 7:50 a.m.

I've bought 3 houses so far in my life, and only sold one. So I still own two. That makes me both a landlord and a homeowner. Guess I'm either doubly smart, or doubly dumb.

Interestingly, I've bought progressively cheaper houses as I've gotten older. My first home was $225,000, when my salary was about $60k. That was scary. I waded into the market right before the bubble was about to burst- 2005. I walked into the closing with a $1000 check and that was the sum total of what I had to put down. Everything else was financed. EVERYTHING.

I ended up refi-ing the place in a couple years, took out a Home Equity line to pay off some credit cards, and meanwhile rented out part of the garage ($200/mo) and had a brief roommate ($500/mo) so there was some cash flow in. Luckily the place never needed much in the way of repair knock on wood.

Then, the market crashed, and I took a job out of state. I absentee landlorded the place, basically breaking even on the mortgage and avoiding selling the place at a loss- which I would have had to given the R.E. market at the time. Foreclosure/Bankruptcy was never considered. I'm not Donald Trump.

Eventually, things got better. The market improved, which meant rents increased, and now the rents gross about 1% of the property value every month, which covers the mortgage and puts some cash aside. Now I really don't want to sell the place. Funny how that works.

Meanwhile, I bought and sold a place in another state, and after 7 years there, ended up about breaking even. That was a lot of basically free living- at least $84,000 in rent worth.

The new place (not too far from the first house) was $75k cheaper than the first house I've ever bought, and meanwhile my salary is higher. I feel much more "comfortable" now, and I'm glad we sort of "underbought" for our current residence. I'm sure we could have qualified for 3x the house but we both have other priorities in life rather than owning the biggest house we could sort-of afford.

Oh, yeah- this is the first place I've ever bought "with" someone, too. That made it better.

pheller
pheller PowerDork
12/14/16 8:54 a.m.

Well we're fairly lucky that we had good savings this year. We moved to Flagstaff with $18k in the bank 18 months ago and are making a $60k down payment plus another $3,000 for closing costs and we will have another $7,000 left over. Higher earnings (an increase of $40k a year) for both of us has really paid off. By the time we hit our first mortgage payment in January we'll be up to around $9,000. I'm hoping to be back up into the teens by summer, even with spending a few grand on parking improvements and drainage solutions in the backyard. Luckily dirt is cheap.

We asked around with a lot of friends and it was surprising how many were not able to make 20% down on houses even half the price as ours. This was various reasons, and all of them made sense. It was really good talking with friends and learning how down payment (and taxes) have a much larger affect on monthly payment than the overall cost of the house, especially when our housing out here is double the price.

Luckily, I'm cheap in the vehicle department as well. Unfortunately the new house won't allow me a fleet of vehicles, but maybe that's a good thing. Instead of saving for and wasting money on a "toy" car, I'll save for the next house, the next move, and be happy with only lifted quad cab truck.

mfennell
mfennell Reader
12/14/16 9:58 a.m.
dculberson wrote:
pheller wrote: Buying a home today is different than 30 years ago. I can't imagine that homes that are selling for $300k today will be worth a million in 30 years. Wages just aren't keeping up. It's part of the reason that the "Boomer" generation is the among the most wealthy, all that appreciation in the housing market is concentrated to a specific generation.
I'm not sure it is that different. Interest rates are much lower of course. And I bet if you asked someone 30 years ago if their house would be worth $300k in their lifetime they would have said no. Or even hell no. There's just no way to predict these things.

The reduction in interest rates fueled a good portion of the gains in housing prices. We paid $350k in '00 for our home, when interest rates were right at 8%. It's now worth about $700k but the exact payment we made in '00 would buy a $550k house at 3.9% today. Adjust the payment for inflation, and guess what? You're right around $700k!

And that's where home ownership is awesome. Our payment is NOT adjusted for inflation. I'm doubly lucky because buying in a higher interest environment has let us refinance several times. Our current payment, including property taxes, is $600 less than it was in 2000.

Advan046
Advan046 SuperDork
12/14/16 11:02 a.m.

I bought my first house mostly based on the ability to park a car trailer in the back next to the garage. I worried a lot and actually found that the previous owners had tricked me and the inspector with a false wall hiding some structural damage.

But as I was nearing the end of structural repairs, hating my choice, my friends came over and we hung out in the backyard playing Frisbee. That hour changed my pain in the A house to a home. From then I focused on the positives I gained from the place. Heated garage workspace, my own kitchen, having friends over for grilling on the back patio.

I never bought into the whole house is a money investment thing. I bought to facilitate my needs from a living space. And now I buy into the idea that where ever I live it should facilitate my interaction with friends and family.

stuart in mn
stuart in mn UltimaDork
12/14/16 12:53 p.m.
ProDarwin wrote:
pheller wrote: Buying a home today is different than 30 years ago. I can't imagine that homes that are selling for $300k today will be worth a million in 30 years. Wages just aren't keeping up. It's part of the reason that the "Boomer" generation is the among the most wealthy, all that appreciation in the housing market is concentrated to a specific generation.
True. But also interest rates on houses bought 30 years ago were *nuts*. Quick googling shows ~10%. So many of those boomers poured a TON of interest dollars into their home. Total value of a 300k 30yr would be around 950k at that rate.

The best I could do on my first mortgage in 1984 was a 15% variable rate. Interest rates were pretty crazy back then. Yes, I did refinance it when rates finally fell, but in any case I'm glad the house is paid off so I don't have to deal with that stuff any more.

fasted58
fasted58 UltimaDork
12/14/16 1:24 p.m.

In '96 I was renting cheap the lower apartment in an up/ down duplex when the owner decided to sell. I had first refusal and didn't want it although it had a 24x28 garage and big yard, the other tenant would buy.

As I looked for new digs I ask the guy if I could keep my shop equipment in the garage for a month or so till I get moved and settled in. No way he says, out by the end of the month. Aha, that changes everything, one call later to the landlady and I was buying the place. Oh, neighbor... out by the end of the month.

A fixer-upper for $40K, 24x28 garage, oversize lot and location, location, location. 2 minutes from everything. Mall, stores, restaurants, docs, hospital etc. Last street in the city w/ field and woods in the backyard, buffer zone. Good investment as rental property and find another place later. I could move my aging parents in ground floor if they needed it and have a caretaker upstairs if needed. Sounds like a win, crazy not to buy.

15 year mortgage but after a year I borrowed the balance due from my savings plan at work and paid it off. Paid myself back 8-something percent interest.

Roof, windows, siding, hot water boiler, gas and water lines, remodeling, addition to garage and carport got done as needed. Ain't no Taj Mahal or dream home but it's paid for, taxes are reasonable.

At the time the bank said I qualified for a $150K mortgage, meh. Bought this place out of necessity, it's home now, close to everything w/ hot water heat (the best), garage and carport, buffer zone and decent neighbors. Comfortable here.

Had friends and co-workers who mortgaged waay big. Really nice homes now, nothin' wrong w/ that and theirs will appreciate much higher than mine.

Mine is plain, does what I need and paid for. I'd take that option again if I had to do it over.

carguy123
carguy123 UltimaDork
12/14/16 1:40 p.m.

Owning your own home is good for both you & your kids. Plus it is the #1 way for regular people to get ahead!

Here are 9 reasons study after study show home ownership benefits you over & above just the satisfaction of owning your own home and not having a party wall with the neighbors. #9 is probably the most important.

1 Studies show that Home Owners enjoy a greater feeling of being in control of their lives and feel more pride.

2 Home Owners as a rule are happier & healthier.

3 Owners are free to redecorate, renovate or otherwise modify their houses to reflect who they are. And of course there's the braggin' rights that go along with it.

4 Owners enjoy stable housing costs. Fixed rate mortgage payments don’t change for 15-30 years but rents have been rising at an average of 5-7%% a year. (your taxes & insurance costs will change over the years, but those costs are also in your rent payment)

5 Homeowners can deduct mortgage interest, property taxes and other items on their income tax returns. The landlord gets those deductions if you rent.

For those of you on 1040 short forms, owning a home usually carries you over the edge & allows you to be able to file the long form which gives you other non-home owning deductions that you can't take on the short form. So home ownership makes you money outside the normal home owning deductions.

6 People who own homes vote more, volunteer more and contribute more to their communities.

7 Homeowners don’t move as often which is less hassle and cheaper on you plus it provides neighborhood stability, which reduces crime and promotes neighborhood upkeep & beauty. It also is much better for your children.

PLUS THERE'S THIS:

8 Homeownership serves as a stepping stone to Wealth.

A 2013 study by the Joint Center for Housing Studies at Harvard University concluded that “as a means to building wealth, there is no practical substitute for Homeownership.”

I’ve saved the best for the last:

9 Children of homeowners do better in school, stay in school longer, are more likely to go to college, get better jobs, make more money, are more likely to participate in organized activities and spend less time in front of the TV.

Homeownership remains a key part of the American dream for many quality-of-life reasons like simply having a place to call your own. But as this research indicates there is also a clear financial benefit as well: Owning a home over time enables growth in household wealth.

Texas was not hit hard in the recession as other states so our property values didn't drop like the more Liberal states. But even so, a home is like the stocks, you don't make or lose any money till you sell. So don't panic. Housing prices are now officially ABOVE what they were pre-recession.

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