Why Your First House Is A Liability • Hacker News Board

Re: Why Your First House Is A Liability

#61

Post by analognoise » Sat, Sep 05, 2020, 4:03 PM UTC

jeromegv wrote: post #54

bluedevil2k wrote: post #33

Earlier quoted context omitted.

I'll add a comment to my own comment. In the last 3 months we've seen a HUGE advantage to home ownership over renting. I recently refinanced, as lots of Americans have done with the historically low mortgage rates. I knocked hundreds of dollars a month off my mortgage payment. You think your landlord is going to knock hundreds off your rent when he refinances the building you're in? No, that extra profit is going rig…

Rent is based on supply and demand. Landlord is not going to charge less or more than the market can afford. So no the landlord won’t drop the price because of mortgage. But there’s a lot of people negotiating hundreds of dollars off their rent in toronto because the market is down and if they refuse, the renter can pick just any other place that is cheaper. And its very well possible that those landlords didn’t get…

In one case as a renter, you go hat in hand to your landlord, and beg for permission.

As a homeowner, you contact a lender and get it done. It benefits you directly.

Re: Why Your First House Is A Liability

#62

Post by scarface74 » Sat, Sep 05, 2020, 4:15 PM UTC

bluedevil2k wrote: post #4

Lots of bad financial advice here. “You can’t unlock a house’s appreciation” - wrong, they have home equity lines of credit, refinances with cash out. “You could do so many better things with the money” - you have to live somewhere, wouldn’t you rather live in a nice house with the potential for appreciation than rent with no chance at all? Also, there’s tax advantages to mortgages here in the US. Renting out a house…

Also, there’s tax advantages to mortgages here in the US.

For most people there is no tax advantage for having a mortgage. With the cap on state taxes now being $10K and the standard deduction being $24000 for a married couple, and interest rates as low as they are you have to a larger mortgage than most people can afford for it to make a difference.

I had a mortgage of around $340K with 3.5% down for a house I bought four years ago, and I paid less than $10K in interest last year.

Re: Why Your First House Is A Liability

#63

Post by scarface74 » Sat, Sep 05, 2020, 4:16 PM UTC

bluedevil2k wrote: post #55

game_the0ry wrote: post #46

Earlier quoted context omitted.

Mostly agree, except: > house IS AN ASSET. Yes, if you own your house. No, if you have a mortgage, the bank owns it. When the market was 'normal,' this would have been less of a risky issue. Take out that 15-30 year loan with the confidence that the home's value would all but be guaranteed to appreciate. The market has been abnormal since early 2000's. Since, the housing market has become more of a speculative and vo…

Even if you have a mortgage, you have some equity in it. Most mortgages require 20% down payment in your home, you can still get a way with a 80/15/5 loan now where you only have to put 5% down.

FHA mortgages are 3.5% down and really easy to qualify for.

Re: Why Your First House Is A Liability

#64

Post by nulbyte » Sat, Sep 05, 2020, 6:54 PM UTC

game_the0ry wrote: post #46

bluedevil2k wrote: post #4

Lots of bad financial advice here. “You can’t unlock a house’s appreciation” - wrong, they have home equity lines of credit, refinances with cash out. “You could do so many better things with the money” - you have to live somewhere, wouldn’t you rather live in a nice house with the potential for appreciation than rent with no chance at all? Also, there’s tax advantages to mortgages here in the US. Renting out a house…

Mostly agree, except: > house IS AN ASSET. Yes, if you own your house. No, if you have a mortgage, the bank owns it. When the market was 'normal,' this would have been less of a risky issue. Take out that 15-30 year loan with the confidence that the home's value would all but be guaranteed to appreciate. The market has been abnormal since early 2000's. Since, the housing market has become more of a speculative and vo…

>> house IS AN ASSET.

> Yes, if you own your house. No, if you have a mortgage, the bank owns it.

This is incorrect in most of the United States and in other countries, like England, where the mortgagee only has a lien; the mortgagor has legal title. That is, the mortgagee only has a right to obtain legal title in the event the debtor defaults. Until the debtor defaults and the mortgagee secures legal title, the debtor has legal title and owns the mortgaged property, which is properly the debtor's asset.

Re: Why Your First House Is A Liability

#65

Post by nulbyte » Sat, Sep 05, 2020, 6:58 PM UTC

CincinnatiMan wrote: post #6

bluedevil2k wrote: post #4

Lots of bad financial advice here. “You can’t unlock a house’s appreciation” - wrong, they have home equity lines of credit, refinances with cash out. “You could do so many better things with the money” - you have to live somewhere, wouldn’t you rather live in a nice house with the potential for appreciation than rent with no chance at all? Also, there’s tax advantages to mortgages here in the US. Renting out a house…

The tax advantages are pretty rare now that the standard deduction was raised to $12k per individual. Only something like 10% of homes still use the interest deduction.

For federal taxes, maybe. But some states allow you to itemize deductions, even if you don't itemize them for federal tax purposes. This is a not insignificant advantage for me.

Re: Why Your First House Is A Liability

#66

Post by juniper_strong » Sat, Sep 05, 2020, 7:08 PM UTC

axegon_ wrote: post #50

> It is safe to assume, you are probably buying your first house for yourself — not for renting it out. In this scenario — your first house will take money out of your pocket, you can’t convert it into cash for at least first few years otherwise where will you live? Hence I believe it is a LIABILITY. Yeah... Of course. But let's look at the alternative - most young adults don't have a roof over their head sorted out.…

>> most young adults don't have a roof over their head sorted out. Statistically few people have the opportunity to live with their parents

"The share of 18- to 29-year-olds living with their parents has become a majority since U.S. coronavirus cases began spreading early this year, surpassing the previous peak during the Great Depression era.

In July, 52% of young adults resided with one or both of their parents, up from 47% in February"

-- Pew Research, https://www.pewresearch.org/fact-tank/2020/09/04/a-majority-...

Re: Why Your First House Is A Liability

#67

Post by goldcd » Sat, Sep 05, 2020, 8:27 PM UTC

Well politely "I disagree"

I moved to a lovely new town for my first IT job (I'm still there 20 years later). I initially rented for the couple of years and moved out when the landlord decided to sell - and he offered to sell to me for what I thought was a ridiculous price. Few years later I decided to buy and saw that original house was back on the market. The appreciation on that original house was more than I'd earnt (pre-tax) in those intervening few years.

Next flat I rented was from a teacher. She'd decided to try working in Australia, but before she left had decided to sell her house in the UK and buy a nice, easily rentable flat in the town she 'might want to move back to'. This struck me as incredibly sensible.

There's your job(s) which may be tied to a particular place and there's your housing in that same place. If you don't own anything you're at the complete mercy of the markets. You might score that great 10% yearly pay-rise, but if housing goes up 20% it's still 'bad'

My humble advice is that not buying is perfectly sensible as it provides you with flexibility - but try to connect yourself to the housing market - you'll always need a house. Buying a place and renting it out might provide best return for the risk, but there are plenty of funds geared around housing you can invest in, just to make sure you don't get left behind.

Re: Why Your First House Is A Liability

#68

Post by goldcd » Sat, Sep 05, 2020, 8:35 PM UTC

bluedevil2k wrote: post #4

Lots of bad financial advice here. “You can’t unlock a house’s appreciation” - wrong, they have home equity lines of credit, refinances with cash out. “You could do so many better things with the money” - you have to live somewhere, wouldn’t you rather live in a nice house with the potential for appreciation than rent with no chance at all? Also, there’s tax advantages to mortgages here in the US. Renting out a house…

I completely agree. The differentiator of "property" is that you're always going to need somewhere to live. If you have a whole portfolio then it's similar to any other bet/investment you might make on a share price - your investment might go up, it might go down - but it's not going to make you homeless. If you have no financial connection to property where you live, you're taking a giant risk.

Re: Why Your First House Is A Liability

#69

Post by geodel » Sat, Sep 05, 2020, 9:27 PM UTC

b203 wrote: post #44

The author's advice is country dependent. My assumption is that he is writing from the perspective of buying in India. 1) In India, rents are very low compared to mortgage payments. 2) Home value appreciation is low given the rate of inflation. 3) financial instruments like home equity line of credit are not available. So yes, it probably is not a good decision to buy a house in a big city in India. Elsewhere? Do you…

True rental yield in India is 1.5-2% pa as compared to 6-7% in America or Europe.

Re: Why Your First House Is A Liability

#70

Post by axegon_ » Sun, Sep 06, 2020, 7:36 AM UTC

juniper_strong wrote: post #66

axegon_ wrote: post #50

> It is safe to assume, you are probably buying your first house for yourself — not for renting it out. In this scenario — your first house will take money out of your pocket, you can’t convert it into cash for at least first few years otherwise where will you live? Hence I believe it is a LIABILITY. Yeah... Of course. But let's look at the alternative - most young adults don't have a roof over their head sorted out.…

>> most young adults don't have a roof over their head sorted out. Statistically few people have the opportunity to live with their parents "The share of 18- to 29-year-olds living with their parents has become a majority since U.S. coronavirus cases began spreading early this year, surpassing the previous peak during the Great Depression era. In July, 52% of young adults resided with one or both of their parents, up…

U.S. is a different story. On the other side of the pond, things look differently. I know of just one person in his late 20's living with his mom, but this is a recent development in his life(used to live abroad, moved back and needed a place to stay). Otherwise he left the nest pretty much when he was 18.