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

Renting is Throwing Money Away, Right? (2015)

affordanything.com

Post reply on HN
Print view View original

211–220 of 497 posts

Re: Renting is Throwing Money Away, Right? (2015)

#211

Post by meric »

ShadowFaxSam wrote: post #200

This same principal can be applied to buying or leasing a car. When I first graduated college and had my first "adult" job I wanted to purchase my first car. The general mantra I heard was "Leasing is throwing money away". I ended up financing my first car, (used) thinking I was making the correct financial decision. The problem with someone fresh out of college buying or financing a car is they really have no idea w…

In life people make mistakes. Picking the wrong finance option for the first car is a relatively small one. :)

Re: Renting is Throwing Money Away, Right? (2015)

#212

Post by mrweasel »

rosege wrote: post #155
littlestymaar wrote: post #130

> You hold a 5 percent fixed-rate 30-year mortgage Wait, are you Americans paying 5% interest on mortgage, whitout even counting insurance? For real?! Edit: Having looked at other comments in this thread, it looks like interest are taxe-deductible, which makes it more affordable, but that's also really weird: it means the gouvernment subsidizes financial institutions to charge American consumers a lot more than the n…

interest rates vary pretty widely around the world. Im guessing you might be in Europe where rates are pretty low still. In Australia they never dropped anything like they did in Europe. If you're lucky you can get a loan around 3.9% but lots of ppl are close to 5% here and you can only tax deduct it if its an investment property

Just as an example from Denmark: My parents have a house financed with a load with negative interests.

Re: Renting is Throwing Money Away, Right? (2015)

#213

Post by mhomde »

phamilton wrote: post #205
mhomde wrote: post #176

People often fail to take into account that risk has a value. I did some quantitative analysis (most of that is BS but that's another story) for a gig and it was big eye opener. People talk like: "Well property praises will always go up. It's a good investment yada yada" but there is a risk that they won't (which often is a sore point). There's even a risk they'll crash. Many people (at least in Sweden) is so over le…

> so over leveraged that it wouldn't take that much for the bank to require a mortgage holder to put in more money to cover the decreased value of the property That's an interesting contract. For a primary mortgage that would be very unusual in the US. (For a secondary line of credit against the home, the bank would likely freeze the line of credit if the value dropped too far.)

I'm not super familiar with how it works in the US. But here you loan against the value of your property. If the value plunges you no longer have coverage for your loan and the bank may ask you to cover the difference. This happened in the 90's in Sweden where many even were forced to sell their homes when they couldn't pay.

Many home owners I've talked with is not aware of that this is even a possibility and refuse to acknowledge the risk. I guess it's one of those thing one rather not think about :) Another major difference is that in Sweden, in contrast to the US you can't simply give up the keys to you home and be rid of the debt (as I think it is in the US) but it stays with you.

Re: Renting is Throwing Money Away, Right? (2015)

#214

Post by pjc50 »

KKKKkkkk1 wrote: post #159

Since housing is an emotional subject, let's try to argue by analogy. I regularly buy lots of dairy products. Milk, yogurt, cheese. Why shouldn't I save some money and buy myself a cow instead? That way, I could satisfy all my dairy needs, and maybe even have some extra milk to sell to my neighbors. No more making the dairy farmers rich at my expense. Now, assume that I sell my cow ten years later. And let's say that…

Usually before those 10 years are up you would have eaten the cow due to declining milk production. Whereas, in large areas of the West, a house will have gone up in value over that time. Unless there's a systemic crisis.

https://www.globalpropertyguide.com/Europe/United-Kingdom/pr... : note that 10 years ago was the very end point of the housing boom which is why Ireland and Spain look so bad on this chart.

Re: Renting is Throwing Money Away, Right? (2015)

#215

Post by samsolomon »

hellofunk wrote: post #191
code4tee wrote: post #54

The “pro renting” crowd has a lot of consistent falacies in arguments: - Financial calculations ignore the leveraged nature of buying a home. Small increases in property value are multipled relative to your initial investment. - Calculations also often assume someone just pays the minimum mortgage payment for the full term of the loan. Even small additional principal payments (which most mortgages allow without penal…

> - “I don’t want to pay those high real estate taxes.” Renters still pay the same real estate taxes, it’s just baked into the rent and can’t be deducted from taxes. It's quite common to rent a house when it is worth X, and for that rent to remain nearly the same even if the house becomes worth X+Y. Due to common restrictions on how much rent can be increased year to year, the taxes on the house can (and often do) gr…

In the US there are only a few areas that have rent control. Most landlords can charge what they want after a year (or whenever the contract expires).

Re: Renting is Throwing Money Away, Right? (2015)

#216

Post by maccard »

ShadowFaxSam wrote: post #200

This same principal can be applied to buying or leasing a car. When I first graduated college and had my first "adult" job I wanted to purchase my first car. The general mantra I heard was "Leasing is throwing money away". I ended up financing my first car, (used) thinking I was making the correct financial decision. The problem with someone fresh out of college buying or financing a car is they really have no idea w…

If you had moved to Europe with a lease, you probably wouldn't have been able to hand over the car and walk away (unless you were at a certain point in the lease), so you would have been on the hook for the lease payments.

Re: Renting is Throwing Money Away, Right? (2015)

#217

Post by phamilton »

mhomde wrote: post #213
phamilton wrote: post #205

Earlier quoted context omitted.

> so over leveraged that it wouldn't take that much for the bank to require a mortgage holder to put in more money to cover the decreased value of the property That's an interesting contract. For a primary mortgage that would be very unusual in the US. (For a secondary line of credit against the home, the bank would likely freeze the line of credit if the value dropped too far.)

I'm not super familiar with how it works in the US. But here you loan against the value of your property. If the value plunges you no longer have coverage for your loan and the bank may ask you to cover the difference. This happened in the 90's in Sweden where many even were forced to sell their homes when they couldn't pay. Many home owners I've talked with is not aware of that this is even a possibility and refuse…

It depends on the state, but at least in California there is "no recourse", which means that if you default on the loan, the bank cannot come after your other assets.

Re: Renting is Throwing Money Away, Right? (2015)

#218

Post by stale2002 »

chrisseaton wrote: post #170
zwischenzug wrote: post #167

I'm fed up of having this argument in London. I rent, and pay about 2% of the value of the property in a year. I get around 8% on shares over the last ten years. Renting is an absolute no-brainer for me. People are shocked when I tell them how much return I get on my savings vs how much my rent is, especially when I tell them where I live (a 'premium' part of London).

I don’t understand why you are arguing in favour of renting with those numbers. You pay more in rent than you would do for a mortgage, and you earn less from your shares than you would do from London property price rises... what’s the upside of renting in your case?

The upside is the 8% return on the stock market that he gets from that 100K that he DIDN'T have to put on the down payment t.

Re: Renting is Throwing Money Away, Right? (2015)

#219

Post by tomohawk »

We've been living in an era of low inflation for quite some time. When inflation becomes more of a real issue again, renting is really going to look like a poor decision next to buying as rents skyrocket. What if this happens as you're getting ready to retire?

The calculations in the article assume PMI (not putting 20% down) and making minimum payments. Purchasing a dwelling this way adds risk and expense. It's better to wait until you have at least 20% to put down (AND 6 months of living expenses saved up), as you then avoid PMI and prove to yourself that you actually have the means to take on the purchase of a dwelling. Get the 30 year mortgage, but plan on paying it off in 10 - 15 years. Its also better to wait until the market is a buyers market.

Since purchasing a home, I've always paid less than I would have if I rented. Its now paid off and I don't have to worry about it. Freedom feels really good.

Re: Renting is Throwing Money Away, Right? (2015)

#220

Post by ShadowFaxSam »

maccard wrote: post #216
ShadowFaxSam wrote: post #200

This same principal can be applied to buying or leasing a car. When I first graduated college and had my first "adult" job I wanted to purchase my first car. The general mantra I heard was "Leasing is throwing money away". I ended up financing my first car, (used) thinking I was making the correct financial decision. The problem with someone fresh out of college buying or financing a car is they really have no idea w…

If you had moved to Europe with a lease, you probably wouldn't have been able to hand over the car and walk away (unless you were at a certain point in the lease), so you would have been on the hook for the lease payments.

True, but the average term of a lease is only 24-36 months while the length of term for financing a car is 60-84 months. (I had a 72 month plan). So you can get out of a lease much earlier, and if you do exit early, you typically only have to make the next 6 months of payments.
Post reply on HN