An option for me to buy a house has come up very suddenly and it seemed like a good idea at first - but I look at a mortgage and think “that’s 15 years I’ll spend paying back, at absolute minimum. Probably more like 25 years” - how can I possibly plan that far in advance?
So, how did you feel about getting a mortgage and seeing such a serious commitment stretch so far into the future? I’m mainly talking about the emotional side of things rather than financial
It was terrifying. So much more so than buying a car.
I thought of it as “locking in my rent”. For me that helped as my rent kept going up.
Additionally, if you eventually want to move, you’ll usually come out ahead a little bit. I was in a popular market, but I think we bought at 220k and sold at 320k. After all was said and done, I think we had a nice 60k profit, and we did not take the highest offer, we took one from a buyer that we knew was a family that would move in. Not a bad consolation prize for a break up, and I think we were only in it for…3 years?
Selling is stressful, but not nearly as much as buying.
Yeah I thought of it as locking in my rent too! But then I found out that my housing payments have gone up each year like rent has. And it’s basically the same cost as renting. Oh well.
Taxes and insurance increase but you have to consider that taxes and insurance is increasing at the same rate for the individuals who own rental properties, which then get passed on to the renters.
Alternative: you can spend that same 15-25 years paying roughly the same monthly amount in rent at various places, and have exactly zero equity or assets to show for it at the end of the period. Zero zilch nada, the money is burned and gone forever.
Frame it in that sense and it’s a no brainer.
In the current market though either try to get a variable rate mortgage or be prepared to refinance it in a few years if/when interest rates cool down. the current rates suuuuuck.
In the UK, rent is substantially more than mortgage repayments.
Landlords will cry about their maintenance costs but I’ve never seen any maintenance that wasn’t the cheapest fix possible by a cowboy family friend.
That’s curious, both in Ireland and Spain mortgages are much lower than rent, it’s literally stupid for you to rent if you have the money to make the down payment (which unfortunately I never did, but know many people who went from >€2000 rent to ~€1400 mortgages)
That’s curious, both in Ireland and Spain mortgages are much lower than rent
You’ve both said the same thing in different ways; not sure if you were surprised.
See kids? This is why you don’t reply to comments before coffee
(:
You’ll likely wind up paying significantly more in rent. When we bought our house in 2020, our mortgage was around $300 more than we were paying in rent. I think within 6 months or so, average rental prices for a similar home were significantly higher. By this point, even an apartment costs more to rent than our mortgage (PITI).
You always pay more for rent- because mortgage payments aren’t just lost to the void, they become equity value that you can then get back out by selling later, less cost of interest. The “real” cost of your house payment in a net-value sense is only the interest, actually.
but I look at a mortgage and think “that’s 15 years I’ll spend paying back, at absolute minimum. Probably more like 25 years”
Yes! Probably more like 25 (or even 30 years)…at the same glorious fixed payment for that entire time! How many dozen times has your prior housing payment, rent, gone up? Now, it doesn’t. The bank will never ask more from you on principal and interest in the future than it does on that very first mortgage statement.
When I bought my first house I was paying $800/month in rent at an apartment and the mortgage payment was $1000/month. I sold that house 17 years later with the last mortgage payment still being only $1000/month. I checked back on my old apartment to see what the rent was: $1400 for the same apartment I used to pay only $800/month for.
Also, you’re not forced to keep that house you’re buying for 25 or 30 years, but when you leave, its YOUR choice not the landlord’s. When I sold my house I pocketed over $135k in profit because the housing value had gone up in that 17 years.
Glorious I tell ya!
Note that this is an American experience. In Canada, every time you renew your mortgage the interest rates are set at the current rate. So people renewing their mortgages now are paying around 7% interest, whereas 5 years ago they might have been paying 2%.
One of my co-workers had his mortgage payment jump from about $2,500 to $3,500/month a couple of years ago.
Note that this is an American experience. In Canada, every time you renew your mortgage the interest rates are set at the current rate.
Thats very true. Isn’t the longest mortgage rate in Canada something as short as 5 years or so? I have no idea how you guys can manage that. This is especially true with hot housing markets the Vancouver or the GTA where the price of homes already is insanely high.
This is the same in the UK too. Still cheaper than renting though.
Property generally increases in value while you pay it down.
My wife and I bought a $400k 3 bedroom flat near the university 8 years ago and we were both scared as fuck. paid $100k off it and just sold it for $600k
That $300k cheque we just used for the downpayment on building a “how do people afford these houses!?!” Thats going to cost $800k. But really our mortgage is only going to go up 20%
30 year mortgage at 52 and 1 heart attack… “The mortgage will outlive me!”
OTOH… locked in $2,000/mo. housing payment for 30 years… It’s already paying off as the rent on our old place is $2,300/mo. now.
Even if it was the same amount or a bit higher (or perhaps even a lot!), it would be better as you aren’t throwing the money away. Good job though, despite the health.
It’s not a 15 (or 25) year commitment - you can sell the house any time and use the money to pay off the mortgage.
Yup this was my thought. Either A) you locked in “Rent” for 15-20 years or you can sell it (usually at a profit) if you need to move or get rid of the property.
But the price of the property can decrease, so it’s better considering an asset with a stable value over time (given the area, energetic efficiency, etc.).
Property is one of the most stable assets; even if there’s a crash you can still live there until it recovers.
It was a no-brainer for me. I’ve got to live somewhere in either case so instead of paying rent I could just aswell use that money to pay off my mortage (in reality I’m paying less).
In general my attitude towards loans is that if you can’t pay cash then you can’t afford it but house is obviously an exception as no one has that kind of money saved up.
Haven’t regreted a day.
I remembered my mom saying that by the end of the 30 year term the mortgage was her smallest housing expense, lower than the electric bill.
So yes, scary, but just remember that principal and interest part is going to seem smaller and smaller since it doesn’t grow with inflation.
It’s cheaper then rent. It raises my credit score. And i finally have ultimate authority on what i can do to decorate and maintain my home.
Honestly after over a decade of belonging I’d never be able to own my own place it was a huge relief to get a mortgage
It was scary. But my mortgage itself isnt too bad. The amortization schedule was scarier, as the first several years you’re almost paying just interest. And you get to see just how much it costs over the total life of the loan.
But I like my house, I feel a sense of pride and accomplishment. I can enjoy doing the fixes myself, and cry when things are so expensive to repair. There are so many things I want to do, but can’t afford to at the moment.
I am really enjoying getting my yard they way I want. And it’s even nicer to have a place that my girlfriend and her daughter can move in.
The house has appreciated 10% in the last two years. And as inflation keeps happening, it devalues the loan. The money I owe is worth less and less and the property I own is worth more and more. At least in general, that’s how it should work.
Property taxes are pricey, but I’m happy with paying them for what I get in the city and neighborhood I’m in.
It’s daunting, and it should be. A person can lose a lot of money and time by buying a lemon of a house.
That said, most people don’t pay off their first house, because they move before the 15 or 30 years is up. And that’s okay.
As Dave Ramsey says, “It’s a house, not a marriage.” Meaning, if it turns out a house doesn’t suit you, sell it. You can’t hurt it’s feelings.
Before my first house, I didn’t realize how much I would appreciate not having to get permission to fix / paint / change my own wall / door / shelf / window blinds.
I also didn’t realize how much I would grow to despise having a Homeowners Association (HOA) up in my business.
Oh dear God, I specifically mandated that I would absolutely not live in an HOA for this exact reason. And boy am I glad I did it. I’m an American damnit. If I want to have two broken down cars on blocks in my yard, then damnit I can. LOL. No, I wouldn’t do that. But it’s better than an HOA.
My rent was about $200 bucks cheaper each month but I can sell this and my payments go towards something I own rather than something the landlord owns.
Plus I can upgrade something I own in ways I’m not going to do as a renter.
Rewiring the Ethernet in my house was exhilarating
It’s hard when you’re starting out, but think about it this way:
- you have to live somewhere-that means rent or a mortgage.
- rent goes to “the man”. So does most of your mortgage payment but you DO pay some of that to yourself. So when comparing the two you have to subtract that out.
- you get a tax break on mortgage interest - so you have to take that out
- the house is likely to appreciate in value - so any equity you build has to be taken out
- this means that a substantially larger monthly mortgage payment might actually be equal to or even less than paying monthly rent.
- rent goes up, nobody talks about this. Mortgages are fixed.
- renting is forever. Eventually (if you’re not stupid with refinances) you’ll own your home and have zero payments.
- in favor of renting - if something breaks in a house, you have to fix it. Renters just yell at their landlord.
- even if you have a crappy interest rate now, you can always refinance in the future if and when rates come down.
Paying for your first mortgage can be daunting when just starting out, but it’s often cheaper than renting when considering the above points, the one exception being how much money you sink into repairs. (Don’t buy a money trap of a house, stay away from major fixer uppers). Eventually your salary will go up and your mortgage payment will be less and less of a burden.
Being in debt sucks, but I’ve felt paying rent sucks even more. So a mortgage ain’t so bad. That’s the way I see things - ymmv
Scary at first, I hare any sort of debt, but I’m about 7 years into it now and I seemed to have gotten in at just the right time, so I’m thankful at how relatively low my mortgage is. I’ve just gotten used to having the debt now. I don’t even think about it in the long-term, to be honest. As long as I can hit my rent every month, that’s all I’m worried about. Paying it off will happen eventually, right before I die I’d guess.
It’s a pain having to constantly maintain stuff, but it’s been an education learning how to fix shit up around the place, one youtube video at a time. So many helpful people out there recording themselves fixing every random-ass thing possible.
It’s weird. The numbers are so big and the dates are so far out there that none of it feels real. The fact that (assuming you fit their magic profile) some bank will accept your signature in return for hundreds of thousands of dollars is stranger still. I honestly wish we lived in a society where this sort of thing was NOT the norm. But if you live in the US, home ownership is one of the few mechanisms in place for us commoners to generate and/or pass on generational wealth (assuming that the whole system doesn’t collapse like the house of cards it probably is while you own the house).
