
Majority of Renters Are Not Saving for Down Payment: Freddie - PretzelFisch
http://www.nationalmortgagenews.com/news/origination/majority-of-renters-are-not-saving-for-down-payment-freddie-1066194-1.html
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hacknat
I could probably save for a down payment, and I even have a kid now, but I
have so many reasons why buying a house doesn't matter to me right now.

Most of my savings goes to retirement, which is now in the realm of being a
down payment for a nicer house. Assuming my portfolio does the same as the
worst 25 years of the S&P 500, it will still beat buying a house. When I'm
older, and I'm not trying to play catch up on my retirement account, like so
many 40 and 50 year olds end up doing, more of my income can go to other
things, maybe even a house.

I'm super focused on my career and family right now. Why would I want to buy
what amounts to a giant time sink?

Bottom line, by focusing my time and money on personal growth. I'll be in a
much better position than if I bought a home.

When you just do the game theory on the American Dream, it makes no sense at
all. Taking compound interest into account, buying a house when your young
amounts to flushing hundreds of thousands of dollars down the toilet.

~~~
nsxwolf
A lifetime of hearing "rent is just throwing your money away" propaganda from
my family convinced me to buy a condo just before the housing market crash.

Result: That condo is worth half what I paid. I got married and had children
so we bought a house, but I am now a landlord for the foreseeable future. It
sucks.

I really wish I'd thrown my money away all those years - I wouldn't have this
constant source of interruption and expense hanging around my neck.

My advice for anyone who really wants to buy a house... I would suggest trying
to make sure it's the last house you'll ever need.

~~~
wahsd
Not to rub it in, but something many people also don't consider when looking
at condos is that there are generally speaking condo fees associated which can
easily run $300-$800 for a run of the mill condo depending on amenities.
There's also a dirty little secret that really doesn't get a lot of air time,
many of the condos have what are essentially builder / developer royalties
that go to the developer in perpetuity. So, on top of dropping 5 digits on
closing and paying thousands in property taxes, you get to pay monthly fees
and part of those go to the developer that built the complex with lowest
bidder and shoddy illegal immigrant labor.

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sliverstorm
$800? A _month_?

~~~
e15ctr0n
Here is an overview of what is involved in condo fees:
[https://thebaverstockteam.wordpress.com/yesterdays-
news/ever...](https://thebaverstockteam.wordpress.com/yesterdays-
news/everything-you-need-to-know-about-condo-fees/)

Here is a reddit discussion from 2 years ago:
[https://www.reddit.com/r/Frugal/comments/1ektio/my_hoa_dues_...](https://www.reddit.com/r/Frugal/comments/1ektio/my_hoa_dues_are_ridiculous_what_options_do_i_have/)

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alistproducer2
People should really do their homework. Find an online interest calculator and
see how much interest you pay over the life of a 30 year loan. Even at these
historically low rates it's about double the sticker price. Also look at the
amortization schedule.

Unless your house appreciates considerably ever year, you will pretty much
always sell at a loss when you factor in the interest paid over your time as
owner. This is not even including incidental expenses like appliance repair or
extra warranties hi might purchase to "protect" you from said incidental
costs.

In short, from a financial standpoint the math on buying a house with a
mortgage never works out in your favor. It's not even close. I am looking at
this from a purely mathematical standpoint. I do undere that there are
qualitative reasons that owning beats renting; however, I'm sick of hearing
people try to make the case that a home is an investment, which is true only
if you ignore the interest paid.

EDIT: if you did sell early in in the loan you could treat the money lost to
interest as an implicit rent. This makes me laugh because you could've just
rented in the first place and had the benefit of mobility and avoided the
headache of putting a house on the market.

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akira2501
> Find an online interest calculator and see how much interest you pay over
> the life of a 30 year loan.

Then go to a cost of living calculator to see how much the inflation trend of
30 years minimizes that. The dollars you pay at the start of your loan have
much more value than the dollars at the end; it tends to take quite a bit out
of the "sticker shock" of just looking at the "total interest paid" column of
an amortization schedule.

~~~
alistproducer2
Yeah but the interest is not paid upfront. You don't get the benefit of time
value money. Interest laid in year 25 is paid in year 25 dollars. It makes the
loss calculation more complex but it does not change the fact that you still
paid double for the property (at least) and will,barring a housing bubble,
will never come close to recouping that money.

~~~
hansef
But the COST of the interest is in year 0 dollars. I may be buying Cokes in
2015 dollars, but if the price is set in 1900 dollars I'm getting a shitload
more Cokes.

~~~
alistproducer2
I get what you're saying. If everything arou.d me has gotten more expensive
and assuming my wages keep up with inflation, the interest cost is cheaper in
later years relative to the earlier years. Makes sense but hasn't wage and
inflation growth diverged in the last couple of decades making that assumption
a questionable one?

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thedz
IMO, the biggest thing in being happy with renting vs buying isn't the
monetary factor, but in how ready someone is with owning.

Owning comes with a lot of advantages: home renovations, settling in and
making something your own, building property value over time, a stable monthly
mortgage payment, that pride that comes from saying you own something.

But it has a lot of other factors to: being responsible for repairs,
landscaping, property taxes, less flexibility if you need to relocate.

The "renting is throwing your money away" line is prevalent, but is also a
gross simplification of the rent vs buy decision.

~~~
cinquemb
So if one doesn't care about home renovations, building property value over
time, that pride that comes from saying you own (but mortgage == owning
something fully in x0 years?) something, and wont mind moving if prices
change, then it seems like one should stick to renting?

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kazinator
I suspect that renters magnify the difficulty of getting a property, which
psychologically prevents them from seizing the opportunity. You need less
money down than you think. The income is the important thing.

~~~
toomuchtodo
Sort of.

Yes, you can get away with a 3% down payment with an FHA loan. But 3% is still
$6K on a $200K property, even more if you're trying for a $250K or $300K
property. That doesn't include closing costs, nor an emergency fund you need
for homeowner expenses that traditionally come up.

Sure, you can afford the house at closing. Are you financially well off enough
to afford it for the next 15/30 years (depending on loan term) so as to not
lose your equity?

Probably not, and that's not going to get fixed until incomes start rising.

~~~
omfg
Not to mention the less you put down the more you're going to pay in interest
over the long haul.

~~~
kazinator
Of course that is true, but mortgages have options to make regular balloon
payments and such. You can "catch the train now" and beat that problem down
later. If you're young and starting out in a good field, you can expect your
income to rise.

How much you're going to pay and how long it will take is just a projection
based on the current numbers: interest rate, remaining principal and payment
size. The projection isn't reality.

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geggam
One has to stay in a house 5 years to break even on buying it. I am not sure
the current employment landscape is conducive to that sort of commitment.

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pmorici
That's not true. The amount of time you need to stay in a house vs. renting is
variable base on a number of factors. Among them are the cost of the house you
would buy compared to the cost of rent among other considerations. Google
"Rent vs. Buy" and you will find a number of comparison calculators. The one
from the NYT is particularly good and tells you how long you need to stay in a
particular house to make it better than renting financially speaking.

[http://www.nytimes.com/interactive/2014/upshot/buy-rent-
calc...](http://www.nytimes.com/interactive/2014/upshot/buy-rent-
calculator.html)

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thrownaway2424
Majority of Germans also not saving for down payment. Only America is deranged
about home ownership.

~~~
peteretep
Not only America - Germany and France are the exceptions, not America.

