Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Home ownership is still mostly renting

mattbruenig.com

Post reply on HN
Print view View original

81–90 of 98 posts

Re: Home ownership is still mostly renting

#81

Post by dsizzle »

anotherman554 wrote: post #18
kindle-dev wrote: post #3

This totally misses the point that there is no where else you can get 20x leverage at < 3% interest. Even with modest appreciation, you're going to make a lot of money putting 5% down on a house.

Using leverage to buy something not expected to increase in value more than inflation is not necessarily a savvy move. Maybe you'd take issue with my "not expected to increase in value more than inflation" statement, but ultimately you are certainly in no way guaranteed to "make a lot of money putting 5% down on a house". Everyone thinks they are a financial genius after a 10 year bull market.

If it moves exactly with inflation, then levering up actually is savvy. Ex: if inflation is 1% and you put down 5%, your return in real dollars is nearly 20%.

Re: Home ownership is still mostly renting

#82

Post by paxys »

ubermonkey wrote: post #8

Not a great argument, really. In much of the country ownership is a much better deal both financially (cost for equivalent housing per month) and in terms of stability. Once you buy, unless you're foolish enough to get an ARM, your costs are fixed -- but rent is subject to capricious shifts upward annually.

ARMs can be advantageous if you know you don't want to live in the house for 10+ years.

Re: Home ownership is still mostly renting

#83

Post by simonh »

shapefrog wrote: post #48
simonh wrote: post #38

The sleight of hand here is presenting the breakdown in the first years of a mortgage, when the interest payment is at it's highest, as though it's representative of the mortgage as a whole. Suppose I presented the analysis based on the last year of a mortgage. The interest payment would be almost nothing, with most of that swinging over into the payment on the principal. Presenting that as being representative of mo…

> The other thing to bear in mind is that mortgage payments, including interest, can be half as much as the rent on a similar property. It can also be twice as much. It can also be the same amount. It can be anywhere between negative a lot & positive a lot. The point is to do the maths and not just parrot the bullshit line 'renting is wasting money' because it may or may not be true.

Yes, absolutely and I don’t think I’m parroting any line. I’ve rented before and it can be the best option depending on your circumstances.

Re: Home ownership is still mostly renting

#84

Post by gruez »

runako wrote: post #68
kindle-dev wrote: post #63

Earlier quoted context omitted.

This only applies to non-recourse state, of which there are only 12.

Doesn't this only matter if the property is worth less than the mortgage? If the lender can foreclose and sell the property for enough to clear the outstanding mortgage, there's no additional loss beyond the down payment (and any equity paid in since then).

But you're still out the downpayment? Your loss is still 20x.

Re: Home ownership is still mostly renting

#85

Post by runako »

gruez wrote: post #84
runako wrote: post #68

Earlier quoted context omitted.

Doesn't this only matter if the property is worth less than the mortgage? If the lender can foreclose and sell the property for enough to clear the outstanding mortgage, there's no additional loss beyond the down payment (and any equity paid in since then).

But you're still out the downpayment? Your loss is still 20x.

If the down payment was x, how are you out 20x? Let's use real numbers:

House cost: $200,000

Down Payment: $10,000 (5%)

(Time passes...)

Value at foreclosure: $200,000 (no price change)

EDIT: I changed the math on this a few times, updating to reflect that you indeed get your downpayment back (minus fees).

The bank sells the house for $200,000. You get your $10,000 back after paying the $190,000 mortgage balance. But you're not on the hook for anything. You walk away with only a hit to your credit. You went from owing the bank $190,000 to owing $0 and having $10,000 in your pocket.

Re: Home ownership is still mostly renting

#86

Post by [deleted] »

runako wrote: post #85
gruez wrote: post #84

Earlier quoted context omitted.

But you're still out the downpayment? Your loss is still 20x.

If the down payment was x, how are you out 20x? Let's use real numbers: House cost: $200,000 Down Payment: $10,000 (5%) (Time passes...) Value at foreclosure: $200,000 (no price change) EDIT: I changed the math on this a few times, updating to reflect that you indeed get your downpayment back (minus fees). The bank sells the house for $200,000. You get your $10,000 back after paying the $190,000 mortgage balance. But…

[deleted]

Re: Home ownership is still mostly renting

#87

Post by shapefrog »

runako wrote: post #85
gruez wrote: post #84

Earlier quoted context omitted.

But you're still out the downpayment? Your loss is still 20x.

If the down payment was x, how are you out 20x? Let's use real numbers: House cost: $200,000 Down Payment: $10,000 (5%) (Time passes...) Value at foreclosure: $200,000 (no price change) EDIT: I changed the math on this a few times, updating to reflect that you indeed get your downpayment back (minus fees). The bank sells the house for $200,000. You get your $10,000 back after paying the $190,000 mortgage balance. But…

Also (for non-recourse state):

House cost: $200,000

Down Payment: $10,000 (5%)

(Time passes...)

Value at foreclosure: $100,000 (massive change)

The bank sells the house for $100,000. You don't get your $10,000 back. But you're not on the hook for anything. You walk away minus $10,000 (i.e. 1x) and a hit to your credit. You went from owing the bank $190,000 to owing $0.

Re: Home ownership is still mostly renting

#88

Post by shapefrog »

runako wrote: post #85
gruez wrote: post #84

Earlier quoted context omitted.

But you're still out the downpayment? Your loss is still 20x.

If the down payment was x, how are you out 20x? Let's use real numbers: House cost: $200,000 Down Payment: $10,000 (5%) (Time passes...) Value at foreclosure: $200,000 (no price change) EDIT: I changed the math on this a few times, updating to reflect that you indeed get your downpayment back (minus fees). The bank sells the house for $200,000. You get your $10,000 back after paying the $190,000 mortgage balance. But…

In your example, you get your deposit back, as 190k covers the debt, extra 10k goes back to owner. (e.g. if 195k was sale price would recieve back 5k etc)

Re: Home ownership is still mostly renting

#89

Post by gruez »

runako wrote: post #85
gruez wrote: post #84

Earlier quoted context omitted.

But you're still out the downpayment? Your loss is still 20x.

If the down payment was x, how are you out 20x? Let's use real numbers: House cost: $200,000 Down Payment: $10,000 (5%) (Time passes...) Value at foreclosure: $200,000 (no price change) EDIT: I changed the math on this a few times, updating to reflect that you indeed get your downpayment back (minus fees). The bank sells the house for $200,000. You get your $10,000 back after paying the $190,000 mortgage balance. But…

>If the down payment was x, how are you out 20x?

right but in this case the house value never changed, so there was never any loss. Suppose the house value went down 5%, then you'd be totally wiped out (ie. you lose your entire deposit).

Re: Home ownership is still mostly renting

#90

Post by runako »

shapefrog wrote: post #87
runako wrote: post #85

Earlier quoted context omitted.

If the down payment was x, how are you out 20x? Let's use real numbers: House cost: $200,000 Down Payment: $10,000 (5%) (Time passes...) Value at foreclosure: $200,000 (no price change) EDIT: I changed the math on this a few times, updating to reflect that you indeed get your downpayment back (minus fees). The bank sells the house for $200,000. You get your $10,000 back after paying the $190,000 mortgage balance. But…

Also (for non-recourse state): House cost: $200,000 Down Payment: $10,000 (5%) (Time passes...) Value at foreclosure: $100,000 (massive change) The bank sells the house for $100,000. You don't get your $10,000 back. But you're not on the hook for anything. You walk away minus $10,000 (i.e. 1x) and a hit to your credit. You went from owing the bank $190,000 to owing $0.

Exactly this. If the property goes up $100k, you earn a 10x return on your $10k. If it goes down $100k, you only lose your $10k (in non-recourse states). It's asymmetric leverage.
Post reply on HN