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Homeowner vs. Renter: Why Should You Ever Buy a House (at all)?

patrick.net

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Re: Homeowner vs. Renter: Why Should You Ever Buy a House (at all)?

#31

Post by vaksel »

ssharp wrote: post #21
vaksel wrote: post #10

I think having the ability to have a home equity line is reason enough to buy. That's 100-200 thousand dollars credit you have at your disposal for a rainy day. And unlike credit cards its not at 30% apr.

If you have decent credit, you can generally get credit cards at, near, or even below a HELOC rate. I have two credit cards that I don't use (well I put 1 fixed payment on each every month to keep my credit score up) with limits at $30k on each. With the money access checks they give me with promo rates, I could easily sit on 30k each year, just bouncing the balance back and forth anywhere between 0 and 2.99%.

yes thats an option but those credit cards last like 6 months before you need to bounce them. And you need to qualify for the credit. With equity line you qualify once at your best at then you can still get access to it if you no longer work/have bad credit etc.

Re: Homeowner vs. Renter: Why Should You Ever Buy a House (at all)?

#32

Post by protothomas »

axod wrote: post #17

Surely arguing that renting is cheaper than owning implies that landlords make a loss - which I'm sure is very rare.

I know that in the UK at least a lot of landlords get 'buy to let' mortgages, where you only pay off the interest on the loan, which obviously makes the payments (and rent) cheaper than a normal mortgage. This does though rely on the house price remaining the same as when you bought in order to pay the full mortgage off at some point.

Re: Homeowner vs. Renter: Why Should You Ever Buy a House (at all)?

#33

Post by hugh »

Tichy wrote: post #23
brfox wrote: post #18

It is rather ridiculous that this author would not include the simple fact that rents nearly always go up... especially over 30 years.

That doesn't seem to be true. Doesn't "irrational exuberance" talk about that? Something can be the case for 20 years, but then change.

Sure, but the point is that "constant rent for 30 years" is a pretty lousy assumption.

Re: Homeowner vs. Renter: Why Should You Ever Buy a House (at all)?

#34

Post by Fuca »

axod wrote: post #17

Surely arguing that renting is cheaper than owning implies that landlords make a loss - which I'm sure is very rare.

Renters definitely lost over a short period of time the secret is they do it for the long run, now the article kind of makes logic for your first house.

Re: Homeowner vs. Renter: Why Should You Ever Buy a House (at all)?

#35

Post by rsheridan6 »

raganwald wrote: post #25
fharper1961 wrote: post #14

One thing nobody seems to mention is that the owner has to pay for the maintenance of the home, while the renter doesn't. Over a 30 year period there will be quite a lot to do.

Landlords factor that in to the rent. Here in Ontario, we have rent control legislation, so rents do not move with the market. However, the landlord is permitted to raise the rents when the cost of maintenance rises. If you don't want the hassle of actually dealing with maintenance, you can purchase something like a condominium, where a management firm handles the maintenance and you write a cheque each month. So...…

True, but landlords usually either do their own maintenance or know who's good and cheap. The average person might tend to get ripped off by incompetent or unscrupulous repairmen.

Re: Homeowner vs. Renter: Why Should You Ever Buy a House (at all)?

#36

Post by rsheridan6 »

vaksel wrote: post #31
ssharp wrote: post #21

Earlier quoted context omitted.

If you have decent credit, you can generally get credit cards at, near, or even below a HELOC rate. I have two credit cards that I don't use (well I put 1 fixed payment on each every month to keep my credit score up) with limits at $30k on each. With the money access checks they give me with promo rates, I could easily sit on 30k each year, just bouncing the balance back and forth anywhere between 0 and 2.99%.

yes thats an option but those credit cards last like 6 months before you need to bounce them. And you need to qualify for the credit. With equity line you qualify once at your best at then you can still get access to it if you no longer work/have bad credit etc.

Not necessarily. I have 15K credit card debt at less than 6% until the loan is paid off. The trick is to max out a credit card, make a big payment, and then they send you a blank check for some ridiculously low rate for an indefinite period on your account with a note that says they hope they're not losing you as a customer. Then you pay the rest of the credit card off and write the check for (almost) your entire credit line. At least that's what Chase did for me.

I do have good credit, but then you have to have good credit to get a low enough interest rate on a mortgage to make it worthwhile, right?

Re: Homeowner vs. Renter: Why Should You Ever Buy a House (at all)?

#37

Post by rsheridan6 »

brfox wrote: post #18

It is rather ridiculous that this author would not include the simple fact that rents nearly always go up... especially over 30 years.

I expect rents to go up considerably, given that people are avoiding buying houses, population is increasing (expected to be 500M by mid-century), and inflation is high (I don't see any way out of the US government's debt mess other than inflation to reduce its real value).

So in 10, 20, 30 years a renter will be paying considerably more while a buyer will be paying a rate locked in long ago.

Imagine the relative pittance you'd be paying now on a loan locked at 1988 housing prices - and that's after 2 decades of inflation rates that were lower than those of the next 2 decades will probably be.

Re: Homeowner vs. Renter: Why Should You Ever Buy a House (at all)?

#38

Post by johnrob »

tesla wrote: post #28

What the author seems to miss is that if you rent for 30 years, you still have to buy or rent a home for year 31. Whereas, if you own your home for 30 years, in year 31 your housing payment is $0 + maintenance, which I'll guarantee is less than the rent the author would be paying.

Yes, but the renter's balance is higher than the future value of the owner's house (which the renter could then buy in cash and still have money left over).

One thing that was ignored is the increase in rent over time. By year 30, the monthly rent will probably be higher than the mortgage payment (in the calculation, we assumed fixed rent over 30 years).

Re: Homeowner vs. Renter: Why Should You Ever Buy a House (at all)?

#39

Post by nradov »

Of course the answer is always "it depends". If you want to run the numbers, here is an excellent Excel spreadsheet that will analyze the rent vs. buy decision for your personal circumstances. http://randolfe.typepad.com/randolfe/2006/04/bubblizer_a_req...

Re: Homeowner vs. Renter: Why Should You Ever Buy a House (at all)?

#40

Post by icey »

rsheridan6 wrote: post #37
brfox wrote: post #18

It is rather ridiculous that this author would not include the simple fact that rents nearly always go up... especially over 30 years.

I expect rents to go up considerably, given that people are avoiding buying houses, population is increasing (expected to be 500M by mid-century), and inflation is high (I don't see any way out of the US government's debt mess other than inflation to reduce its real value). So in 10, 20, 30 years a renter will be paying considerably more while a buyer will be paying a rate locked in long ago. Imagine the relative pit…

I bought my house in 2001, and for me to rent an equivalently sized house now is already $600 to $1000 more expensive per month than my mortgage. It was a bit worse a couple of years ago, but still; people who forget about rent increases are in for a big surprise if they could have gotten a house for a reasonable price.
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