How the heck did mortgages become so OK??

[snshijuptr]

Suggesting someone "always buy" or "avoid renting" is too simplistic.

Real estate is always local, and when you move, its tough to take it with you.

If I were to move to a place where I could have a $30,000 house, I would be leaving behind everyone I know including all my family and friends. A home is more than just a purchase.

Rent is a payment made in return for a service.

Rent is payment for services rendered, but all money is a comparison. You are only saving money because you could have spent it. You are only rich because others have less money than you. Rent is money down the drain because there is an alternative way to invest it.

Now all of this is coming from someone who will not currently buy a house because rent for me is a better investment. I have less "money down the drain" renting than if I were to buy a home right now. If I could buy a home free & clear, I might.

Remember not all debt is bad debt because you might be able to earn more money by putting money in an investment than you currently lose with debt. If APY > APR and appreciation > depreciation and maintenance costs are taken into account, then debt can be better.

[Beppington]

Here's another way of looking at it: If I wanted to be a really, really, really bad guy, or bad friend, let's say, I would urge people with all my might to go into debt on a house. And, if they were just about to buy a $30K or $50K house, or whatever modest house they could actually afford to pay cash for, I would intervene & do my darn best to try to talk them into buying this $100K super-dooper house instead; You know, the one that would enslave them more & longer.

By the way, I think the fact that real estate generally appreciates fools home buyers/ homeowners into thinking that makes it more OK to borrow money on. When in reality, as some of you have commented, your home probably shouldn't be considered an investment anyway, even if its value does go up. Don't forget, even if the value of your home goes up, in general so does everybody else's, so it's pretty much a wash, aka meaningless.

[Snodog]

I want to know where all these 30k houses are so I can get me some?

*crickets*

[MonkeyMama]

Beppington - I think that is fine if there any houses worth buying in those price range. The point is, for most of us, not.

I have often thought that if I lived in a low cost area, we would have just paid cash in a home. Perhaps, but the low wages can be rather shocking. My sister is in a similar field and owns a $100k-ish townhome in a rinky dink small town. Her job is similar to mine, but her pay is 25% of mine. Yes - 25%! It may be easier to pay off *our* house in a few years than it would be for someone like her.

I suppose this illustrates that I don't agree that moving somewhere with cheap housing would make me better off, economically. We can pay off our house and continue to reap the large wages, long after.

We did move somewhere for significantly cheaper housing, but it is an extremely desirable place to live with high wages. Now, that's a smart move.

[GREENBACK]

I want to know where all these 30k houses are so I can get me some?

*crickets*

Try Detroit...lol.

[Beppington]

I want to know where all these 30k houses are so I can get me some?

*crickets*

Look, I don't know anyone else's exact financial situation. My $30K figure was just an example of a possible price target for a home that, while probably a very modest home, maybe even junky, might keep someone from needing a mortgage at all.

If you must have an example, here's a decent looking 1,700SF house in Ocala, FL for $50K: Ocala Real Estate and Property Search | Ocala | Bosshardt Realty Services, Inc.

Another for $50K: Ocala Real Estate and Property Search | Ocala | Bosshardt Realty Services, Inc.

These aren't glamorous, but both would certainly put a decent roof over you & yours for a very low price.

Edit: It took me about 4 minutes to find those, & they're both in FL, so you can't tell me $30K isn't out there.

Edit 2: Oh, & that crickets thing is hilarious!!!

[Ima saver]

No, I would not go back to ever having a mortgage again. However, I do not think everyone is talented enough to build their own houses. My husband does not do just the organizing, he does all the actual work himself, including plumbing, electrical, cabinets, hardwood flooring, painting, tile, etc. without hiring any help other than 1 or two framers. The houses have to be built to code and pass inspection. ( and no, we do NOT make 20% on a house) My husband works by the hour.

[kork13]

Look, I don't know anyone else's exact financial situation. My $30K figure was just an example of a possible price target for a home that, while probably a very modest home, maybe even junky, might keep someone from needing a mortgage at all.

Edit: It took me about 4 minutes to find those, & they're both in FL, so you can't tell me $30K isn't out there.

Beppington, it seems rather apparent that you're unwilling to accept that mortgages simply are (by necessity) a way of life for the majority of American homeowners. Yes, cheap houses are out there at the price range you're talking, most of which are a) in foreclosure/short sale status or b) seriously not worth paying much of anything for, due to quality, neighborhood (safety, schools, crime, utilities/shopping availability, etc), and so many other reasons.

Beppington - I think that is fine if there any houses worth buying in those price range. The point is, for most of us, not.

MM has it on the nose. I'm currently living in one of the lowest COL areas in the US, and my friends and I all looked at houses when we came here. The lowest I saw that I or anyone else I know/respect (read: non-drug dealers) would even consider being buying were at least $75k, and those were in foreclosure/short sale.

Bottom line, if you want a sub-$30k home, find the local trailer park, buy your single-wide, and enjoy it. In 30 years, it will be worth no more than the land it sits on. That won't happen with a decent house, but you have to PAY for long-lasting quality. Even if a home doesn't appreciate significantly over time, they don't drop to zero. Most cheap homes (both in price and therefore quality) will become unlivable within 15-20 years (tops).

//BREAK-BREAK//

Beppington, this thread is arguing in circles around your insistence that nobody should ever be stupid enough to get a mortgage. Let it go, and perhaps we can agree to disagree?

[disneysteve]

kork, even though OP has made a rather extreme point about people paying cash for a house, which I agree isn't practical for the vast majority of Americans, I do think there is value in the conversation. I think most will agree, as I said earlier, that far too many people buy far too much house and spend/borrow far too much money to do so.

Look, I'm a physician earning a 6-figure income. Do I live in a neighborhood with other doctors, attorneys and professionals earning similar incomes? Nope. Not at all. I live in an older area with more modest homes and my neighbors are retail managers, teachers, utility workers and various other average working folks earning probably near median income for this area. Could we "afford" to live in a bigger house in a nicer neighborhood? Sure, depending on how you define "afford". The larger mortgage payment and higher operating costs would have to come from somewhere, like retirement savings or travel costs or perhaps I'd still be repaying student loans rather than having paid them off years ago. My partner, who graduated 4 years before me, is still repaying his loans and will be for years to come.

My wife and I made the decision to get the smaller house and the cheaper lifestyle that goes with it. If more people made a similar decision, the landscape wouldn't be overrun with McMansions and the whole housing bubble thing wouldn't have happened, or at least not to nearly the extent that it did. Our home lost very little of its value in the whole market collapse. Our area didn't see prices drop 20 or 30 or 50%. At worst, our home's value maybe dipped 10% because it was never over-inflated to begin with.

[Beppington]

Beppington, it seems rather apparent that you're unwilling to accept that mortgages simply are (by necessity) a way of life for the majority of American homeowners. Yes, cheap houses are out there at the price range you're talking, most of which are a) in foreclosure/short sale status or b) seriously not worth paying much of anything for, due to quality, neighborhood (safety, schools, crime, utilities/shopping availability, etc), and so many other reasons.


MM has it on the nose. I'm currently living in one of the lowest COL areas in the US, and my friends and I all looked at houses when we came here. The lowest I saw that I or anyone else I know/respect (read: non-drug dealers) would even consider being buying were at least $75k, and those were in foreclosure/short sale.

Bottom line, if you want a sub-$30k home, find the local trailer park, buy your single-wide, and enjoy it. In 30 years, it will be worth no more than the land it sits on. That won't happen with a decent house, but you have to PAY for long-lasting quality. Even if a home doesn't appreciate significantly over time, they don't drop to zero. Most cheap homes (both in price and therefore quality) will become unlivable within 15-20 years (tops).

I never suggested anyone buy a trailer. I'm aware that they generally only depreciate.

//BREAK-BREAK//

Beppington, this thread is arguing in circles around your insistence that nobody should ever be stupid enough to get a mortgage. Let it go, and perhaps we can agree to disagree?

I also never called anybody stupid. I just suggest that everybody STOP & really think hard before borrowing, & be willing to reduce their desired lifestyle in the beginning of their working lives, be patient & save ... & you just may be able to go mortgage-free, or darn close to it. I see no reason to give up on that belief just because people post what they think are all these super-great reasons against it.

My point in all this is that the little mortgage snowball got rolling at some point in the past (maybe the 1800's?) & it's rolled & rolled & gathered into a humongous ball that collects almost everybody, & has everybody thinking it's perfectly OK & the thing to do, when they could think & plan & reduce their desired lifestyle for probbaly just a somewhat short initial period of their working lives, avoid a mortgage, either entirely or almost entirely, & be happily debt-free knowing your life is yours to do what you want with it.

That's all.

It doesn't have to be "I owe, I owe, so it's off to work I go" for you. And, that little poem is really bad when your job disappears & you're left with just "I owe, I owe ... Uh-oh."

With that ... it seems people are irritated about this topic, so I'm not gonna post anymore about ... unless someone asks a specific question.

[kork13]

I don't want to get into it, but Beppington, I do apologize -- I didn't mean to come off heated/irritated/whatever. Poor choice of words.

[TBH]

My thanks to the OP for introducing the topic. I agree with most others on here who think that for many people, a mortgage is a good idea, but the point is well taken that most people don't even think it's possible or desirable to be mortgage-free.

I have a relative who is a bit obsessive about being mortgage-free. She got herself into a position where she owns her home "free and clear" (her favorite phrase) but has very little in the way of savings or other investments. Now she wants to retire, and all her money is in her house. She needs to sell the house and buy something much cheaper (which means moving out of state because she lives in a high cost of living area). But the market where she lives has plummeted, and her house has been sitting on the market for a loooong time without selling. She has lowered the price several times but she needs to get a certain amount for it or she won't be able to retire. Meanwhile, she had to keep working through a serious illness because she had no choice.

I am trying to learn from her mistake. I also really want to be mortgage free. I have to restrain myself from paying too much extra on the mortgage principal every month, because it will eat into other savings goals too much if I do that. I want to make sure I keep saving in other ways, not just paying down my mortgage. That way, when I'm done paying my mortgage, I will have income-generating investments that will allow me to retire without selling my house. Because I have this relative who's in such a tough position, I like to make sure my investments and savings accounts stay at least neck-and-neck with the equity in my house, so I always have as much $$ outside the house as I do in the house.

[disciplinenow]

lol I find it funny that are soical status is based of how much money we can barrow!

[TBH]

One more thing--I agree that most places you can't buy anything livable for $30,000. But I did buy my first house for $70,000, and put about $30,000 into it making it livable (critical things like wiring and furnace and roof and a bit of cosmetic work.)

If we had stayed in that house we could have paid it off very quickly, but I sheepishly admit that we moved up to a bigger house after 5 years and now we have a bigger mortgage too. It will take a long time to pay this mortgage off. So I am in a sense exactly the person the OP is talking about--someone who has limited my own freedom by taking on a bigger-than-necessary mortgage because I wanted a bigger, nicer house. I do feel uncomfortable owing so much more money (old house mortgage balance when we sold it was $45,000 and new house balance is currently $210,000), but I also LOVE my house and buying it was one of the best things I've ever done.

Sometimes if you can afford to do something simply because it makes you happy, that's more important than saving your money instead. Every single time I come home and see my house I feel happy. That's worth a lot.

[Joan.of.the.Arch]

Beppington, are you a homeowner? If so, did you also first earn the cost of the house before you bought? Did you rent while saving for the house? Live with home-owning family? It really would be such a rare example for someone to buy a house, never rent, and yet pay 100% cash upfront for the house. t I would like to hear how people might do it.