Don't Buy a House Until You Read This

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It is an empirical fact that on average, homeowners have a higher net worth than those who rent. Home ownership is a major part of the American dream. It increases community, creates stability for raising a family, and gives you the warm and fuzzies inside your heart when you gaze out onto your half-acre empire.

But don't for one second think that home ownership is all sunshine, rainbows, and ice cream sandwiches. There are serious trade-offs that you should know, understand, and accept before signing on the dotted line.

1. Mortgage debt -- a marriage you can't divorce
According to the Census Bureau, the average home price in 2010 was $272,900. A traditional mortgage will finance 80% of that, or just over $218,000. At the same time, the Census Bureau also reported that median household income in the U.S. was just over $51,000.

Are you comfortable owing over four times your total gross income (before taxes, mind you)?

And don't forget that you'll most likely be signing that I-Owe-You to a megabank like Bank of America (NYSE: BAC  ) , Wells Fargo (NYSE: WFC  ) , or JPMorgan Chase (NYSE: JPM  ) .

According to industry publisher "Inside Mortgage Finance" and reported by The Wall Street Journal, these three banks alone commanded 38% of the mortgage origination market in the third quarter.

And if you decide to go with a smaller bank, don't be surprised if your mortgage ends up being sold to one of the government-sponsored housing entities, Freddie Mac (NASDAQOTCBB: FMCC  ) or Fannie Mae  (NASDAQOTCBB: FNMA  ) . These names may sound familiar -- $130 billion of your tax dollars went to bail them out just a few short years ago.

Don't forget the pain and suffering created by these giants of the financial world. Are you comfortable signing up for a 30-year mortgage with one of these companies? 

Perhaps you're reading this and thinking, "But if I don't buy a house, I'm throwing away my money to a landlord with rent!"

Would you rather be "throwing away" your money to a landlord, or to a bank? Because if you bought that $272,000 average American house with a $218,000 loan at 5% for 30 years, you'd pay over $52,000 in interest to your bank of choice over the first five years alone!

Before the house was paid in full, you will have paid that bank over $203,000 dollars -- in interest alone!

And speaking of landlords...

2. When you own the house, you pay for the maintenance and repairs
Landlords, in my view, get a bad rap. A respectable, professional landlord can make life orders of magnitude easier. They are your on-call repairman, plumber, hardware store, and lawn maintenance company.

Air conditioner compressor breaks on the hottest summer day? Landlord will take care of it. Snow storm knocks a large branch into the yard? Landlord will take care of it. Bathroom drain cloggs? Landloard will take care of it. 

You know your landlord. He or she is a part of your community. They live, work, invest, spend time, and generally care about the quality of life in your town.

Did I mention they'll make life exponentially easier when something breaks? Your landlord will even pay the property taxes for you!

Would the Vice President of Mortgage banking at Wells Fargo replace the broken burner on your stove for you? Certainly not, even though you're paying him $50,000 over the first five years of your mortgage.

Would Bank of America's mortgage operations executive in Charlotte help you buy that new $5,000 A/C unit when the old one kicks the bucket? Maybe, but only by giving you another loan with a healthy dose of interest payments (assuming you qualify -- you do have $218,000 of outstanding debt already -- over 4 times your annual gross income).

Nothing like a surprise $5,000 expense (with interest) to ruin those summer barbecue plans.

3. How long did it take to save up that down payment?
In our "average American" example, our potential homebuyer would have to put down a payment of $54,000 to qualify for the traditional mortgage. After closing costs and miscellaneous expenses, lets call this a round $60,000 just to purchase the home and get a loan approval.

That means that in truth, this buyer needs a decent bit more than $60,000, though. The bank, you see, will not make a loan for a borrower who is putting 100% of their liquid assets into the home. Banks like back-up plans, and without some cash cushion, there is no real back-up plan.

So now, our typical American, making a hair over $50,000 a year, must save somewhere in the neighborhood of 150% of her annual income to comfortably afford the down payment.

Yes, you can get a loan that requires a lower down payment, whether it be through government programs through the FHA, USDA, or others, or by purchasing mortgage insurance to mitigate the higher loan-to-value ratio.

But these alternatives are not necessarily ideal, either -- more debt, for one, and more money being "thrown away" on bank-required (and possibly bank-sold) insurance. One step forward, but two steps back.

It may make more sense to take that $60k to $75k savings and invest in a target date fund, or an index fund, or maybe even in some of the bank stocks (if you can't beat them, at least profit with them?). Those investments are liquid, they can be rebalanced, they don't require property taxes, and their toilets won't overflow, forcing you to pay a plumber to come out on a holiday.

4. Buying a home is not an investment
This final point will be hard to swallow. Buying a home is not buying an investment. It's buying a highly leveraged forced-savings account.

According to data from Freddie Mac, the FHFA, and the S&P/Case-Shiller Home Prices Index, the inflation adjusted return for an investment in a home bought in 1970 is just over 27% through the second quarter of this year. That's a 27% return over a 43-year holding period!

To understand just how bad this return is, consider that General Electric stock purchased in 1970, with dividends reinvested, would have returned 3,775% through 2009. The S&P 500 has returned on average 9.7% per year over the same period. 

If buying a home isn't an investment, then what is it?

It's a forced savings account. Along with that healthy dose of interest that goes to the bank every month is also a sliver of principal pay-down. Over 10 to 20 years, those principal payments can add up to a good bit of equity. So for those individuals who have trouble putting money aside in savings every month, this is an attractive feature.

But the point is, don't buy a house thinking it is a panacea for financial woe. If you want to maximize your investments, look elsewhere. If you want real estate exposure, consider a REIT. Don't be fooled into thinking that buying a home is a one-way ticket to the good life.

Now, feel free to sign on the dotted line
If, after reading this, you are still sure you want to join the ranks of homeowners, then I salute you. Your decision is thoughtfully considered, you've done the research into the upsides and the downsides, and you're making your own decision. 

Personal finance and managing money is as much or more art than it is science. There is never a single right answer that applies across the board. We must all consider the risks, the rewards, and our own personal situations, and then act thoughtfully.

And if you're going to take out that big loan, please consider your local credit union. It would be a shame to "throw away" all that money to the big banks that have caused our economy so much hardship these past few years.

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Read/Post Comments (29) | Recommend This Article (29)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 08, 2013, at 9:25 AM, rsmoans wrote:

    Even if you rent, you are paying the maintenance costs and property taxes. All of those are included in the rent, along with a profit for the landlord. The landlord will manage the repairs and make sure that the property taxes are paid, but the tenants are paying for this convenience.

  • Report this Comment On December 08, 2013, at 9:44 AM, duuude1 wrote:

    Yes of course rsmoans, and meanwhile you have the opportunity to use your time more profitably, to work harder, to get more training and education, to get raises and promotions and better paying jobs and move to where the best opportunities are without getting stuck with a house that won't sell.

    It's been a huge financial benefit to never have owned - by far.

    Duuude1

  • Report this Comment On December 08, 2013, at 9:52 AM, Auser wrote:

    So basically, don't buy a house at all. I don't want to buy because I don't want to give up the flexibility renting gives me. Got a job offer in another town? Just move. Your neighborhood/local school district is going downhill? Just move. No worries about trying to sell a house. I've seen too many of my friends stuck in homes they can't sell forcing them to give up or delay plans.

  • Report this Comment On December 08, 2013, at 10:20 AM, duuude1 wrote:

    Yeah Auser, that's where I've been and where I've stayed despite everyone using that classic but false line "you're throwing your money away".

    Couple more points in addition to Jay Jenkins's warning about becoming financially entangled with Big Banks or Big Freddie's Fanny:

    - who feels they can trust their employer to keep them employed through thick or thin? Here are some stats on the most profitable companies in America - drug makers:

    http://www.forbes.com/sites/matthewherper/2011/04/13/a-decad...

    - who feels they can trust their town to remain fiscally responsible and solvent? Here's a small list of troubled towns and cities:

    http://www.governing.com/gov-data/municipal-cities-counties-...

    - who feels they can trust any particular industry to remain on American soil? Steel anyone? Textiles? Manufacturing in general?

    And with these uncertainties, we still think buying a house and committing to a 30-yr mortgage is a great idea?

    Not today.

    Duuude1

    (and I'm an optimist - you should see me when I'm grumpy)

  • Report this Comment On December 08, 2013, at 10:28 AM, NickD wrote:

    I'm asking for 200k my house is worth 200k

    what do you bid?

    I have PG stock asking for 84.52 a share

    what do you offer?

  • Report this Comment On December 08, 2013, at 10:47 AM, sandycat wrote:

    I bought my condo in 1989 for $41000 and paid it off in 2002 just before I retired. My assessment which includes garage parking, true central heat and air conditioning, water, garbage disposal, cable, internet, and building maintenance is under $600 a month. The going rent in the Chicago area for a one bedroom apartment is $1200 and up and doesn't include A/C, parking, cable and internet. I got things my way when I put up my own kitchen cabinets, bathroom washbasin, closet doors, blinds and tiled my floors. Yes you do sometimes people in condo buildings that can make life miserable but they are few and far between.

  • Report this Comment On December 08, 2013, at 10:53 AM, Carrot1530 wrote:

    No two situations are the same. For some renting is the best option, for others owning. Renting was prefered during the last 5 years as home prices plummeted. However there were some good buys in 2008 - 2011 in certain areas of the country.

    Having moved 13 times over the last 30+ years I can say that I've both rented and owned, I prefer owning.

    A house is an investment if and only if its bought at the right price and the thought process during the time it's owned is about selling for top dollar. Meaning you keep things neutral, you don't over upgrade and if you're lucky you have the skills to do the upgrades yourself, labor costs are a killer.

  • Report this Comment On December 08, 2013, at 12:05 PM, VegasJerry wrote:

    You forgot to mention that all of that interest you pay is tax deductible and that most millionaires hold a large part of thier assets in real estate.

    Another missed fact is that the big bad banks will NEVER lend anyone any money for stock investments regardless of who is picking the stocks. Walk into any bank or credit union and say, "I want to borrow money to invest in the stock market" and see if those greedy bankers will charge you interest to get the return this writer quoted. If houses were such a bad investment then why would any bank lend on a house but never lend on stocks?

  • Report this Comment On December 08, 2013, at 12:14 PM, wattookee0 wrote:

    I agree with a lot this article has to say, but it leaves out so much.

    The real question about a mortgage is not whether I am comfortable having a loan with a huge bank. The question is, am I comfortable paying double the list price, after I've paid 30 years' worth of interest? Your "low interest rate" spread out over 30 years is nearly as much as the principle you are financing. Financing a house costs you double if you pay it off over the full length of a 30 year loan. The good thing about a 30 year mortgage? In 30 years, the mortgage payment will be peanuts to you because of inflation. What was a large payment previously will seem incredibly small, not because you're actually making more money, but because inflation has made that dollar amount less valuable.

    My biggest problem with this article is that the "average Joe income" cannot, and does not, represent the income of those who are "on average" purchasing $272,000 homes. Renting is very popular and often times necessary for the working class. Furthermore, it is far more accurate to report on MEDIAN incomes and prices, as one fat-cat billionaire who owns 8 luxury mansions dramatically skews the average, even if he is lumped together with 10,000 working-class heroes purchasing one $100,000 home each.

    Finally, I am currently a homeowner. We purchased our home in 2009. It was a foreclosure. The mortgage payment is $500/mo including tax, PMI, and insurance. I make slightly more than the average Joe income. Prior to that I was renting a smaller place for $800/mo, and making a lot less money. My wife and I both waver on the wisdom in our purchase, but have finally settled on it being a good thing for us. The low monthly payment has improved our cash flow. Our improved cash flow has given us the ability to act on opportunities when they present themselves.

    That said, I am not happy that, if I stay in this house for 30 years, I will pay nearly double the list price. I am not happy that I may struggle to sell it when I need to be mobile. I am not happy that things break and I have to pay to fix them. But, the alternative would be to have less cash now to do things like pay tuition without loans, save up for investment opportunities, and enjoy life with a little monetary breathing room.

  • Report this Comment On December 08, 2013, at 12:26 PM, jtc2000 wrote:

    Owning is about buying early, I bought my place when I was 21... but bought in a city that has a ton of jobs in my profession (Yes had help from parents but paid them back now), so even though I changed jobs 5 times, I still keep my house. I only have 10 more years on my mortgage I will never need to worry about extra housing costs (mortgage) into my 50's for even if I sale it I don't need a house more expensive. I see renting is smart and maybe better if you didn't buy before your 30's but really buying in you 20's is way better knowing I will be mortgage free/ renting in my 50's

  • Report this Comment On December 08, 2013, at 1:45 PM, rentfreein7 wrote:

    brought in 2004 paid off mortgage in 2011..mortage and rent free

  • Report this Comment On December 08, 2013, at 2:39 PM, syzygysyzygy wrote:

    it all depends on your situation I can buy a house fr cash for 400 000 and let daughter and grand daughter live there rent free just split running costs

    cheaper for me to rent furnished room and less risky but in own house I have younger person to help me since I am 79 now and interest on bank CDs now are zero and I cant be turfed out just because of some landlord;s bee in his bonnet

    go figure

  • Report this Comment On December 08, 2013, at 2:47 PM, kykyd wrote:

    This article is extremely biased towards renting.

    let me speak to each of the 4 points listed for renting:

    1) Mortgage Debt - Yes you will be paying a lot of interest in the first years of the loan, but the interest is a deductible expense on your income tax. Not so for rent. Your mortgage will probably be less than what you pay for rent, so don't worry about how much interest you are paying because you would just be paying it out for rent otherwise. And don't even consider whether you want to pay money to a landlord or interest to a bank, you should only be interested in what is best for your own finances and quality of life.

    2) Maintenance and Repairs - Yes you have to fix your stuff, but you don't have to worry about being without heat for several days while your landlord finds the best deal on new equipment or is taking care of another renter before you. As pointed out by another comment, you can get an upgraded refrigerator or paint you rooms whatever color you want. You are in control!

    3) Down Payment - Okay, the down payment is a problem. But $60,000 assumes you bought a $300,000 house. You can get a cheaper house, get the money from your parents, get the seller to hold the mortgage with less down, or just wait until you save it up.

    4) Buying Is Not An Investment - True, it is a highly leveraged forced savings account, but I consider a savings account an investment if it is drawing interest. However, the key words here are "highly leveraged". If you have a $250,000 house and it goes up in value only 1% a year, that's $2,500 return the first year and it compounds after that. If inflation gets high, the value increases even faster. Meanwhile your mortgage payment remains the same. (But if you are renting, your rent goes up with inflation).

  • Report this Comment On December 08, 2013, at 3:43 PM, MomOpinion wrote:

    This article is ridiculous. Obviously it's an investment with financial pros and cons - but it is also your home. There is a lot of joy to owning your own home. We don't make money owning our own clothes either, but you don't see people renting those. Don't tell Trump real estate is not a good investment.

  • Report this Comment On December 08, 2013, at 4:32 PM, millewk wrote:

    Who is the Motley Fool hiring these days? This article is "foolish" on many levels! To make a rent v. buy comparison one needs to compare apples to apples! The average home size in the USA is a 2,200 sq. ft. two story on a 1/4 acre lot. To compare this home with a rental home or apartment one must use the same metrics. I assure you the costs are not that much different, esp. since mortgage rates are closer to 3% than the 5% Mr.. Jenkins cites, which is a huge difference! If you are mobile and move around frequently then by all means rent. The landlord example he gives is laughable. The landlord is a free handyman? Seriously? Ever hear about covering the nut Mr. Jenkins? Every tenant I have whether they are retail/commercial or residential cover my costs.....ALWAYS! they pay my insurance, taxes and maintenance! They pay the heat, electric, water and sewer and they pay for their garbage pick up! For my multi unit properties all those cost are factored in. My margins run between 15% to 40% depending on the property! You are you trying to kid!

  • Report this Comment On December 08, 2013, at 4:42 PM, Bouje wrote:

    "According to the Census Bureau, the average home price in 2010 was $272,900. A traditional mortgage will finance 80% of that, or just over $218,000. At the same time, the Census Bureau also reported that median household income in the U.S. was just over $51,000."

    Apples and oranges. I'd bet you the median household income of homeowners (the ones actually paying the $272,900) is much higher than $51,000.

  • Report this Comment On December 08, 2013, at 4:47 PM, west555 wrote:

    Renting in most places is too cheap right now and gives you great flexibility to wait until the Housing Bubble corrects.

    And no, the Landlord cannot pass all those soaring costs onto the tenant since right now the rental market is flooded with empty apartments and houses.

    Can anyone guess what it costs to evict a Deadbeat?

  • Report this Comment On December 08, 2013, at 5:44 PM, JackSprat12 wrote:

    I agree that the decision to buy or rent a primary home is a quality of life issue for most people. I also agree that landlords get a bad rap. That is all I agree with in this article. The numbers the author presents may or may not be correct, but lets assume they are correct. They are nonetheless incomplete and assessed too qualitatively to be of any real investment value.

    Consider the following numbers given by the author:

    - Average house cost is $272,900.

    - Average down payment is 20% or $54,580 (author rounded down to $54,000).

    - Average rate of return on the S&P500 stock index has been 9.7% annually.

    - 30 year mortgage has a 5% interest.

    - Closing costs to purchase the house is $6,000 (actually should be $5,420 based on author's numbers).

    Now consider very important factors not in the article:

    - Of the 9.7% S&P 500 return, about 2.25% was in dividends. Dividends are taxed as ordinary income when paid. The 9.7% overall return of the S&P 500 index cited did not consider this tax. If you assume a federal tax bracket of 20% and state of 5%, the overall annualized S&P 500 return would be about 9.13% and smaller for a higher tax bracket.

    - Inflation affects rents, real estate taxes and home owner's insurance but not mortgage interest if you assume the mortgage is fixed rate.

    - Mortgage interest and real estate taxes are tax deductible but rents and insurance are not.

    - In order to realize a gain (or loss) an investment has to be sold. Selling an investment triggers taxes that need to be paid assuming the investment yielded a gain. Whether the tax is a long term gain or short term gain depends on the holding period, but for the purpose of this discussion assume everything is long term (in fact, most of it is).

    - There are no taxes on the profit of a primary residence if the gain is $500,000 or less. A gain above this amount is taxed as ordinary capital gains. The closing costs of $6,000 (actually $5,420) are added to the cost basis of the house making the profit on the house smaller.

    Finally for the sake of discussion assume the following.

    - The individual in this example is in the 20% federal tax bracket and a 5% state tax bracket. In fact if he were in a higher tax bracket the results would be even more skewed towards purchasing the primary residence.

    - The rent initially equals the cost of the mortgage + real estate taxes + insurance.

    - The rent increases by the inflation rate annually (as does the real estate taxes and insurance).

    - The house increases in value by the rate of inflation only.

    - The entire down payment plus closing costs of $60,000 that the renter didn’t have to pay is invested in the S&P 500 index with dividends and splits and sales reinvested at the same rate of return.

    - The individual holds the house for 30 years until the mortgage is paid off (if he held longer the results would be skewed even more towards purchase) after which time he sells the house and incurs a 6% real estate commission and 2% closing costs.

    - For the sake of discussion I have assumed two cases. They are:

    1) Average annualized inflation rate of 1%

    2) Average annualized inflation rate of 2%

    In fact, the higher the inflation rate the more skewed the results will be in favor of purchasing.

    - The difference between rent and house payments are invested in the S&P500 stock index with the same rate of return as above, i.e., 9.13% after tax, (although I would rather invest in rental properties).

    The results:

    Renter:

    - After 30 years the after-tax gain of $618,781 in the stock index less the cost of rent, the renter realizes $4,346 for 1% inflation.

    - After 30 years the after-tax gain of $716,589 in the stock index less the cost of rent, the renter loses $97,808 for 2% inflation.

    Home Owner:

    - For the 1% case after 30 years the cost of owning the house will be $464,936 after taxes. and the owner can sell the house and net $338,401. The owner will also realize a net gain of $146,271 from S&P 500 stock index investments after taxes. The total net gain of home + S&P500 index is $484,672. Therefore the home owner will realize a net gain of $19,736.

    - For the 2% case after 30 years the cost of owning the house is $480,550 after taxes. The owner can sell the house and net $454,754 after costs + taxes. The owner will also realize a net gain of $419,587 from stock investments after taxes. Therefore the total net gain of home + S&P500 index is $874,341. Therefore the home owner realizes a net gain of $393,791.

    In summation, the url name, www.fool.com, is appropriate for this article.

  • Report this Comment On December 08, 2013, at 6:45 PM, mbilin wrote:

    obviously the writer of this article missed a boat or queen mary,if i may.

    in 1980's i bought 2 houses attached,i was 21 yo,i saved the money for down payment.

    in 2006 i sold both houses,a developer wanted to raise 1/2 block,he made me an offer i could not refuse.

    now i am retired in fla.,bought a forcloused house with pool and gulf access and happy and pappy and bursting with love.

  • Report this Comment On December 08, 2013, at 7:34 PM, luckyagain wrote:

    If you have a desire to retire someday, then owning your home is probably going to be the biggest determining factor. You have to live somewhere and owning your own house will probably be the cheapest place to live. The less that you spend on housing, the more that you have for other things.

    Talking about a home as being an investment is not valid. Very few people buy and sell homes in order to make money unlike the stock market. Everyone needs a place to live and so you can own your home or pay rent. Both cost money, but a home usually will cost less over your lifetime.

  • Report this Comment On December 08, 2013, at 8:03 PM, SkepikI wrote:

    ^ I agree with you BUT transaction costs are killer if you have or WANT to move. The tie of owning a home may cut into your adventurism or opportunity profile... to your future detriment. BOTH of these factors are in my experience (home owner since 1980 except for 2 years when I rented post move) much more important and more costly than anything mentioned in the article.

    I actually made more money on real estate one of the two years I rented than the decades I owned. Lest that confuse you all, it was a quirk of timing and because I ventured to sell into a hot market, become homeless and RENT, I made out.

    And because I was patient and waited to buy again when I found the right deal, I made what looks now (pre second real estate crash) to be a shrewd buy.

    And of all my owned home experiences, I find I made the most money when I bought well, and lost the most money when I felt I had to sell and move on.... only to quickly buy a home in another place.

    If you think about it, RENTING for as long as it takes to make the right buy is definitely preferable. But Ironically it is what makes owning your own home a better deal than renting. How's that for inscrutable? ;-)

  • Report this Comment On December 08, 2013, at 10:29 PM, cobranut wrote:

    I don't consider my house an "investment" at all, as I never intend to sell it.

    It is where I live, and when I built it I included everything I need to enjoy the life I love.

    I have a nice, modern, efficient home on 35+ acres, with garage and shop space for my collection of cars, boats, motor-coach, and other toys. My wife has her garden. I can go out on my deck and grill, shoot, or take a pee if I want.

    These are the things that are important to ME.

    You may have other priorities, and renting may suit you better.

    The important thing is to live where you want and can afford, and enjoy it.

  • Report this Comment On December 09, 2013, at 12:45 AM, LadyWriter wrote:

    There are several comments here stating that home mortgage interest is tax deductible. That is only true if you itemize, and those itemized expenses must be greater than the standard credit that you are already given when you file taxes. And if you're not sure what that means, ask your accountant :)

  • Report this Comment On December 09, 2013, at 9:18 AM, fisa wrote:

    Are you comfortable owing over four times your total gross income (before taxes, mind you)?

    I got exactly this far in the article and stopped. In the very first point, the author starts off comparing the average home price to median income. Mean and median are not even remotely the same thing. It may very well be true that most people owe 4x their gross income on the their house (though I doubt it). But, given that the provided information doesn't support that in the least, the entire premise of the article immediately became questionable in my mind.

  • Report this Comment On December 09, 2013, at 9:18 AM, caaross wrote:

    I will never rent again, I hate apartments/condo's/townhouse! Anything with a shared wall, my previous neighbors were loud and disrespectful. I never want to go through that again. My neighborhood is quiet and I can do what I want with my house without someone telling me I can't without their permission. My sister prefers to rent her house she does not want the responsibility,homes are also very expensive where she lives. We live in a state that property values are not over blown. So what would cost $400,00.00 where she lives cost us $143,500.00. Everything was updated the heat pump/furnace, roof, floors counters, stove refrigerator etc. I was not about to buy a home that would need a new roof or furnace in 2 years like my neighbors ended up doing. Its all about what your needs are our needs were not living next to loud neighbors. I have never regreted it and never will!

  • Report this Comment On December 09, 2013, at 11:51 AM, miteycasey wrote:

    There is a difference between rental property(income) and owning a home(expense).

  • Report this Comment On December 09, 2013, at 11:53 AM, magnru wrote:

    You rent a house for $1500.mo but 15 years later you are paying $2,000. for the same house rental. You buy a home with a $1,500.mo payment and 15 years later you still pay 1.5k although the taxes will rise.

  • Report this Comment On December 13, 2013, at 5:08 PM, rambotrader wrote:

    Is the writer of this so called informative article a financial dimwit? Seriously, the assertions defy belief.

    Whilst is correct that there are costs in owning a home the fact that you eventually own it and will not thereafter be paying dead money (rent) is the issue. Add to that the value of your house increases over time (inflation), which means that the final dollars you repay are actually less, and you have a smart move.

    The other issue with renting is that you may have a bit of extra cash available during the first few years of the loan but then this end up being consumed in often worthless ventures.

    I am more interested if Jay may be representing a landlord's association of some sort or not as the article has all the hallmarks of self interest.

  • Report this Comment On March 26, 2014, at 11:31 PM, kazmapapa wrote:

    Easy rule of thumb (my case) is this: Buy if you can afford 20+% down and if you could possibly pay off 30 yr loan in 15 yrs. Don't buy while you only have 5% down. That would be a murder.

    I short sold my condo in 2012 which today would still be under water, and since then I only rent. I am saving every month. In my view, American houses are still way overpriced.

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