Is it really necessary to own a home if your mortgage is going to be 20 years long?
I get that renting is like throwing money in a hole, but people are so much more nomadic these days. What's the big deal in moving once every 10 years once rent gets unbearable?
Can you even find anywhere to rent? Not everywhere has a liquid rental market.
Moving only once every 10 years sounds great. Renting means maybe having to move on notice as short as one month. Back when I was renting I moved about every 3 years, although that was also house-sharing with other young professionals.
Rent is usually more expensive than mortgage payments, and house price appreciation is your only chance to make a leveraged investment that pays roughly 7% annually.
Edit: also, obviously, after 20 years you have no more payments. Frees up a whole lot of cashflow. Would you really want to go into retirement on a fixed income with a variable rent payment?
Note that a "20 year mortgage" just sets the amortisation rate of the payments; you can accelerate it, and usually will end up re-mortgaging every 3-5 years to get better rates.
> also, obviously, after 20 years you have no more payments.
You have maintenance. And if something bad happens with the foundation, that's very expensive to fix. Unless you just plan to die and have the house demolished and the property sold (which is honestly preferable in some cases of inheritance).
I had to pay $25k to have supports installed in the crawlspace and other mitigation to avoid foundation work. I might have gotten ripped off, and the annoying thing is that I can't know for sure because I'm not informed about foundation work, structural engineering, or other principles.
Simply inheriting a house and trying to sell it turned me off from owning a home in the near future due to the arduous process of paperwork, red tape, maintenance, and a low-liquid market. I'll take a comfortable living van/RV over dealing with real estate again if it means I can reduce the risk of dealing with those things to zero.
Real estate probably won't be a part of the post-scarcity economy, otherwise I'd bet on just buying a home in 30 years while forgetting what a mortgage was for.
There's going to be plenty of scarcity to go around for the rest of our lives.
And unless you're already in the top 1%, or unless you believe full-on socialism will ever catch on in a country run by and for the benefit of capitalists and corporatists, you can personally expect to see a lot more of it once everything worth doing has been automated.
Don't forget the roof that needs replacing every 15 or 20 years. Appliances. Furnace. Plumbing. Septic tank. Water lines on your property. Tree removal. Re-decorating and re-modeling. Replacing windows.
I think people generally maintain the homes they own to a higher standard than the ones they rent out. It's not equal in home ownership vs renting. The place I rent has the cheapest appliances possible, paint mostly chipped off on the steps, the flooring is from the 80s, etc.
If you look down a street where I live (Boston area) you can likely guess which units are rentals and which are owned.
I thought that, too... until it was time for me to buy a house. Then I discovered most home owners are just as miserly as landlords. Hacky, quick DIY fixes? Check. Cheapest possible repair/replacement option chosen every time? Check. Obvious concern for only things that "increase resale value" over things substantially more important to the house's long term well-being? Check.
I can't tell you how many houses I looked at with peeling, worn roof shingles, but a bangin' dishwasher and stove.
My brother, only a few months after buying his first house, had a tree in the backyard get struck by lightning, break in two and crush his neighbors garage.
The neighbors insurance paid for that, but then he still had to pay almost $3000 right away to get the rest of the tree removed from his backyard, because it was still in bad shape. Was an unpleasant introduction to the wonderful world of home ownership.
Yeah, it's basically like insurance. You're not hit with a sudden $10k+ bill, you just have a rent that has ~$100 a month factored in for maintenance costs.
Also with renting, one should be careful to avoid arguments at equilibrium. E.g. not all landlords seek the same profit margin and rent increases don't track improvements perfectly. Comparison shopping and moving opportunistically, one can stay ahead of the curve. Other people already financed the improvement ts you're enjoying!
The property group takes on risk if something like a roof needs replacing unless they just keep a lot of cash sitting around for just such a thing. They may also have access to better loans but I have no idea for sure.
I don't want to keep a pile of cash around waiting for housing emergencies (personal emergencies are a different thing), and I certainly don't want to sell stocks to fix a roof if my roof fails during a recession.
Many US dwellings use asphalt shingles, which wear out. Slate roofs may last for hundreds of years, but they are pricey and I'm not sure how they stand up to golf ball hail.
Not that I'm helping, but I think you were definitely ripped off. Those supports cost about 20 dollars each. I had a company do one part for 3k, and did the rest myself. 25k should have been a big red flag.
You have no more principal and interest payments. You still have property taxes (~$1000/mo for me) and most will pay insurance (~$300/mo) and you'll have on-going maintenance; I think it's wise to ballpark the last at 1% of the house market value.
I'm a two-time homeowner and it absolutely fits my family life situation very well, but it's a common fallacy that housing costs go to zero when the mortgage is paid off.
I like that approach as it makes clear the financial flows and put the tenant in the logical frame of mind of "am I getting what I'm paying for?" when considering new civic projects or other budget items.
It would be nice if it worked that way, but local tax rates tend to be a matter for national politics, resulting in all sorts of messed up incentives. National government imposed a freeze on council tax increases for a while. The council tax system also has not had a house revaluation for two decades and the upper "band" is quite low, so it's regressive at the high end.
At least in the competitive housing markets of San Jose and Seattle this is not much of an issue as every apartment I've visited allows pets and most even have accommodations for them as perks. I suppose there are limits though so maybe if you wanted to have 4 dogs that might not be allowed
We couldn't find a decent place in New Jersey that would take our Labrador. Even the place we have now had to be talked into letting us have one of my cats. :|
Rent is NOT throwing money away, it is HIGHLY dependent on where you're living. There are MANY sunk one-time costs you have to pay when buying a home, including:
--realtor commission (averages 6% of home price, or approximately 1.5 years of 30 year mortgage payments)
--title fees (frequently 1% of purchase price)
--other legal and bank fees
The NYT has a buy vs rent calculator that helps make decisions like these:
A mortgage is just renting the money instead of the house. In both cases you're paying for the time value of money. It's just that in many (but not all!) cases you can get a much better deal renting the money than renting the house.
Technically correct, but my point is that these costs are frequently ignored and in order to make home ownership more profitable than renting these costs must be amortized over a very long period of time.
Or having certain pets. I had to buy in Tampa because no one would rent to me and my Great Dane, regardless of amount I was willing to part with as a pet fee (I offered extra insurance and $1000 and was still declined).
Moreover, talk to the person managing your apartment.
In my apartment (managed by a property management company at that), they allowed me to repaint some walls, bring in three appliances of my own (washer/dryer and dishwasher), completely customize a closet, and replace a light fixture. Took a week for the business manager and corporate to sign off on the modifications, but they felt the requests were entirely reasonable.
This happened because of two reasons: 1) I asked. 2) I agreed to pay a very modest additional deposit for the modifications ($400 total), and used suitably insured vendors of their choosing to have the appliances and light installed (they let me do the closet myself, as the paint with just a $100 deposit to cover changing it back), at a total cost of about $300.
To get this stuff elsewhere I would've paid FAR, FAR more in rent (+$1000-1500/mo, easily). Though I asked, was very reasonable, and made it clear that I wasn't looking to half-ass anything.
At the end of the day the new apartment was a tactical downgrade ($700/mo savings) from where I came from. With the new stuff I got approved I have "broken even" on my changes after 7 months. Now for the next 4-5 years that $700/mo savings just goes in my pocket, the apartment is now barely a downgrade from where I was prior, and I have top-notch appliances that most luxury rentals in the city don't even offer. Moreover, when I move out those appliances come with me -- I should get a good 15-20 total years out of them with proper care.
Rent gets unbearable way faster than every 10 years. My first place in the Bay Area had rent jump from $1800 (uncomfortable but doable), to $2300 per month. This was after just one year of being there, and since then I've noticed that 4 years later rents in that neighborhood are now at $3300 a month for a one bedroom.
And if it gets unbearable after 10 years, it's because the market went up, not because your unit went up. You can't just move to a different property in the same area and start back where you were from a rent perspective.
OTOH, I lived in Belmont CA on $2000 rent for a whole house blocks from caltrain for over 3 years, no adjustments.
I think you have a bit of a skewed view of reality there - people in the US are far less likely to move for work than in past generations. You may be surrounded by a bubble of digital nomads, but it’s far from common.
I guess it depends on where you live and what you're looking for. When we where looking for a house there simply wasn't anything to rent long term that matched our requirements. So the option simply wasn't there. It was buy or nothing.
I'm going to offer an alternative idea on the rent-vs-buy discussion that I never hear. In most sane countries (not the US) you can achieve non-resident status and not have to pay taxes. In Canada this is possible if you rent, but not as a home-owner. You have to be out of the country at least six months a year and you lose your health coverage.
What you gain is not having to pay taxes. If you're working remotely on a software engineer's salary, that can free up over $50K a year. That's enough to pay your rent, and likely also your food, for a small family even in Canada's most expensive cities.
Taxes are also throwing money in a hole.
I think most people couldn't do it because they have kids (and don't want to homeschool), or one or both spouses have jobs in a physical location, or they just don't like nomadic living. But it's an interesting idea.
I get that renting is like throwing money in a hole, but people are so much more nomadic these days. What's the big deal in moving once every 10 years once rent gets unbearable?