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    More: Asinine, home price, Mark Carney, Niagara Falls FROZE, interest-only loan, mortgages, mortgage payments  
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3221 clicks; posted to Business » on 11 Jan 2014 at 8:22 AM (31 weeks ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



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2014-01-11 02:09:16 PM

GRCooper: So, if I take out a mortgage on a house with 200 acres of land, then I can sell 100 of those acres and it has no effect on the original deal?

/serious question


For any given loan, the underlying collateral should be well-defined in the contract.

So, if all 200 acres is part of the definition, then no; if not, then yes.
 
2014-01-11 02:52:16 PM

Chagrin: 30 year mortgage is ~4.5%
Stock market is ~7-9%.

You should be taking the longest loan period you can and paying it off as slowly as possible.


You forgot to account for appreciation of the property.
 
2014-01-11 03:14:54 PM
We were 3 years into a 30year, and went down to a 20year. We pay the same price evey month now (rate drop equaled the difference in payment), but chopped off seven years of loans, and about $100,000 in interest.
 
2014-01-11 04:54:08 PM
In 1996 we did a 20% down payment, 20 year mortgage, but paid off principle at every opportunity (mortgage anniversary date).  We paid it off in 15 years, and have been mortgage-free for a few years now.  We now continue to plow what we used to pay on the mortgage amount into retirement investments.

It required lots of other financial sacrifices.  There are lots of toys I could buy, but don't.  I see friends that make a whole lot more money than we ever did suffering under the weight of long term mortgages.  I really don't understand that kind of financial thinking.
 
2014-01-11 05:35:27 PM

The Larch: Tommy Moo: While that is technically the best thing to do if you are a robot, there is value to some people in having an ironclad guarantee that, no matter what, hell or high water, injury or disability, no one can EVER take the roof from over my head.

As long as if by "hell" you don't mean "fire burns the house down", and if by "high water" you don't mean "water knocks the house down", and by "injury or disability" you don't  mean "costly medical bills and lifelong care requirements that drive you bankrupt", then your ironclad guarantee is quite valuable.

Well, you might have to worry a bit about wind. And snow. And taxes. And eminent domain. But other than those nine or ten things, you really can stay in the house for all eternity, or at least until the Sun turns into a red dwarf star.


Insurance policies typically cover the cost of rebuilding a house exactly as it stands. Yes, I'm making the very reasonable assumption that I will always be able to afford $300 per month in taxes and insurance. Even if I have to collect welfare I will get that much from the government. Also, it will only take me a few months of working after paying off the house to save up five years worth of that.
 
2014-01-11 06:01:23 PM

Tommy Moo: Chagrin: 30 year mortgage is ~4.5%
Stock market is ~7-9%.

You should be taking the longest loan period you can and paying it off as slowly as possible.

While that is technically the best thing to do if you are a robot, there is value to some people in having an ironclad guarantee that, no matter what, hell or high water, injury or disability, no one can EVER take the roof from over my head. The psychological boost I get from that is worth more than the extra few dollars I'd marginally make in interest each month, so I plan to pay my mortgage off as quickly as possible so that I can spend as many years of my life with that awesome, empowering feeling as possible.


I felt that way too.

Now I have two mortgages, one on a profitable rental home and the other a 2.85% rate on my primary home. I still want to pay it down, but it makes no sense. More money in my retirement takes precedence. Granted its a 15 year, so I am essentially making double payments compared to most folks alrready. Went fifteen year with an fha for 22% down, no pmi - found out my credit looked bad because they all said I didn't have ten years of credit history. Apparently my refinancing of the other home counted as a break and I have no credit cards. I hate the credit game.

Now the new boat... That'll be cash :)
 
2014-01-11 06:02:23 PM

Prophet of Loss: A renter and a buyers start out ...

39 years later, the buyers defaults, loses everything put into the house and has ruined credit. The renter is still renting.

Who comes out ahead in this scenario? The bank.


You don't know how mortgages work, do you?
 
2014-01-11 06:11:08 PM

Smackledorfer: Prophet of Loss: A renter and a buyers start out ...

39 years later, the buyers defaults, loses everything put into the house and has ruined credit. The renter is still renting.

Who comes out ahead in this scenario? The bank.

You don't know how mortgages work, do you?


Oh, and in my entire life, renting has never been cheaper than owning.

It has big benefits like never being house-poor, tied down, losing it to a hurricane and your insurance company farking you, etc. It is a fine option.

But nobody, anywhere, is renting out property at a loss. Even a month to month loss is still likely putting the landlord ahead due to what goes into principal.

I don't know why renters pretend/imply otherwise.
 
2014-01-11 06:16:24 PM
This is a scam. Longer amortizations don't just reduce your payment; they reduce everybody else's, and encourage more people to take out mortgages. So house prices go up, along with mortgage interest rates. In the end monthly payments will wind up about where they were before; your mortgage will just take longer to pay off. The only winners are the banks, who get more interest revenue.

If you're tempted by these long amortization loans, honestly, you need to re-think why you have your heart set on buying and whether it really makes sense for you.
You could do worse than to take a tip from the banks themselves. At least where I live (Canada), no major bank owns its own home (well, HQ); they sold to property management firms and rent them back.

The reason housing is so damn expensive in Britain is that private developers simply refuse to build enough housing stock to meet demand, unless you count the sheds that many new arrivals (to the Mail's horror) are forced to rent from unscrupulous homeowners. Whitehall needs to figure out why no building is going on and do something about it. "Easier" credit will just make things worse.
 
2014-01-11 06:27:07 PM

Intrepid00: TedCruz'sCrazyDad: Intrepid00: Tommy Moo: Chagrin: 30 year mortgage is ~4.5% Stock market is ~7-9%. You should be taking the longest loan period you can and paying it off as slowly as possible. Addendum: Not to mention the fact that in many states, people can sue you to take any cash or investments you have, but it's a lot harder to take someone's house. In some states you can even keep your primary house through bankruptcy. Depends. Federal level could apply a 125k cap no matter state laws.

Texasallows you to keep your house after bankruptcy, no matter how much it's worth.

Not true, 1st Texas limits the land size and 2nd federal law would limit the value of the house under certain conditions.




Your right, only the first 200 acres.
 
2014-01-11 07:36:33 PM

Smackledorfer: Oh, and in my entire life, renting has never been cheaper than owning.

It has big benefits like never being house-poor, tied down, losing it to a hurricane and your insurance company farking you, etc. It is a fine option.

But nobody, anywhere, is renting out property at a loss. Even a month to month loss is still likely putting the landlord ahead due to what goes into principal.

I don't know why renters pretend/imply otherwise.


Depends on the market. For example, in my area, a 2 bedroom condo will run $500k to $600k. Assuming 25% down on the 500k, 24 year amortization, and a 3.95% interest rate gives a monthly payment of $1962.42. Condo fees run about $500, and taxes $300/month. So, monthly payment of $2762.42. Equivalent 2 bedroom apartments in the same area are about $1800/month.

So, renting is about $1k cheaper in terms of monthly payment. Now, the inevitable retort - 100% of the rent payment is lost, but not all of the mortgage payment. Amortization table tells me that the interest payments are greater than $1k/month for the first 85 payments / 7 years. Starts at about $1200. So, in the first seven years, interest+condo fee+taxes range from $2000 - $1800 a month.

So yes, in my particular area, renting is cheaper than purchasing. For a condo vs apartment, and for the better part of a decade, anyway. Don't know about houses - they're about $1.5 million to buy, no idea what they rent for, assuming it's even possible.

// condos - the worst aspects of renting and owning, together at last!
 
2014-01-11 08:06:43 PM

trialpha: Smackledorfer: Oh, and in my entire life, renting has never been cheaper than owning.

It has big benefits like never being house-poor, tied down, losing it to a hurricane and your insurance company farking you, etc. It is a fine option.

But nobody, anywhere, is renting out property at a loss. Even a month to month loss is still likely putting the landlord ahead due to what goes into principal.

I don't know why renters pretend/imply otherwise.

Depends on the market. For example, in my area, a 2 bedroom condo will run $500k to $600k. Assuming 25% down on the 500k, 24 year amortization, and a 3.95% interest rate gives a monthly payment of $1962.42. Condo fees run about $500, and taxes $300/month. So, monthly payment of $2762.42. Equivalent 2 bedroom apartments in the same area are about $1800/month.

So, renting is about $1k cheaper in terms of monthly payment. Now, the inevitable retort - 100% of the rent payment is lost, but not all of the mortgage payment. Amortization table tells me that the interest payments are greater than $1k/month for the first 85 payments / 7 years. Starts at about $1200. So, in the first seven years, interest+condo fee+taxes range from $2000 - $1800 a month.

So yes, in my particular area, renting is cheaper than purchasing. For a condo vs apartment, and for the better part of a decade, anyway. Don't know about houses - they're about $1.5 million to buy, no idea what they rent for, assuming it's even possible.

// condos - the worst aspects of renting and owning, together at last!


The major point is that "nobody is renting out property at a loss" and that is almost always true. Note I discussed the long term.

Do you think the folks renting those condos aren't making money? As soon as they don't they will sell. If everyone is selling the price drops, and things soon return to property being worth buying.

You just live in such a high property value area that ownership is out of reach to the common man. It likely isn't a bad purchase, but merely an expensive one.
 
2014-01-11 08:24:41 PM

Smackledorfer: Prophet of Loss: A renter and a buyers start out ...

39 years later, the buyers defaults, loses everything put into the house and has ruined credit. The renter is still renting.

Who comes out ahead in this scenario? The bank.

You don't know how mortgages work, do you?


You assume the house is above water. That's a big assumption. Oh and fark you for your snide response. I'd say DIAF, but its not slow enough for the likes of you.
 
2014-01-11 08:32:13 PM

Prophet of Loss: A renter and a buyers start out ...

39 years later, the buyers defaults, loses everything put into the house and has ruined credit. The renter is still renting.

Who comes out ahead in this scenario? The bank.


Mortgages are 25 years here. So for twenty five years the renter has to pay higher and higher rent every year as rent goes up while the mortgage payments stay the same. Who is winning there?

Then after twenty five years the person who bought stops paying and never has to pay again, while the renter has to carry on paying higher and higher rent forever. Who is winning there?

I pay $250 a month mortgage. If I was renting I'd now be paying $1500 a month. In ten years I'll be paying $0 a month.

(And here property tax is in addition to both mortgage payments and rent, so that makes no difference.)
 
2014-01-11 08:36:35 PM
I cannot believe realtors with big hair wield so much power in the US. Sure, banking has just as big, if not bigger role in this but real estate lobbying must have the best hookers and blow to continue to enable the stupid housing farce.

The housing market in the US would be comical if it wasn't such a anchor to the economy.
 
2014-01-11 08:36:43 PM

Smackledorfer: Do you think the folks renting those condos aren't making money? As soon as they don't they will sell. If everyone is selling the price drops, and things soon return to property being worth buying.


Well, in theory large apartment businesses could be operating at a scale that allows for lower costs than individual ownership.  But $500k for a unit that's $1,800 to rent sounds steep--not necessarily calling bullshiat on trialpha, just saying that's probably not typical. Underscores the fact that every area is different at any given moment.
 
2014-01-11 08:40:06 PM

Prophet of Loss: Smackledorfer: Prophet of Loss: A renter and a buyers start out ...

39 years later, the buyers defaults, loses everything put into the house and has ruined credit. The renter is still renting.

Who comes out ahead in this scenario? The bank.

You don't know how mortgages work, do you?

You assume the house is above water. That's a big assumption. Oh and fark you for your snide response. I'd say DIAF, but its not slow enough for the likes of you.


If a house is under water after 39 years of a 40 year mortgage then there is something seriously wrong.

Of course they could have re mortgaged several times and taken equity out, but then they'd have the proceeds of that which a renter wouldn't have.

If I lost my home the day before my mortgage ended and I got nothing from the foreclosure, which is vastly unlikely, I'd still be way ahead of someone who rented for all that time. They'd have no equity, like me, but they'd have been paying far more each month.
 
2014-01-11 09:11:34 PM
The biggest problem is people desperate to be around London, because people have fallen for the brainwashing about house prices rising and "good investments". Move away from la-la bubble land to the real areas of Britain, and if you can find even a reasonably OK job, it's still quite reasonably priced because all people are doing is buying a home in an area with plenty of homes rather than viewing it as an investment.

Note: homes are not investments. OK, the house on it might be, but land is just farking land, and there is no "investment" except gambling. It's not like putting money into Intel and they make a better chip and create wealth. Land is a zero-sum game. If someone does something to make some land more valuable (like putting a town on the railway), it increases the demand for that land from people and consequently reduces demand elsewhere.


And here's the problem if you live in London - people are starting to work around this property problem by outsourcing to people out in the sticks like me. That's going to deflate those house prices if you're having to compete with me and my almost non-existent mortgage.
 
2014-01-11 09:15:30 PM

MikeyFuccon: This is a scam. Longer amortizations don't just reduce your payment; they reduce everybody else's, and encourage more people to take out mortgages. So house prices go up, along with mortgage interest rates. In the end monthly payments will wind up about where they were before; your mortgage will just take longer to pay off. The only winners are the banks, who get more interest revenue.

 Bit of a stretch calling it a scam when the bank is only pulling 4.5%. There's lots of more lucrative investments that a bank could be dedicating its money to, and faced with an option of a payback term 33% longer (40yr vs 30yr) I think the bank would be much happier getting the faster payback. I would agree that these types of loans cause home prices to rise, however.


Tommy Moo: While that is technically the best thing to do if you are a robot, there is value to some people in having an ironclad guarantee that, no matter what, hell or high water, injury or disability, no one can EVER take the roof from over my head. The psychological boost I get from that is worth more than the extra few dollars I'd marginally make in interest each month, so I plan to pay my mortgage off as quickly as possible so that I can spend as many years of my life with that awesome, empowering feeling as possible.


While you were feeling safe with all of your equity tied up in your home last year, you might've noticed that the market went up 32%. Like you I could've paid off the $70K that I personally still have in unpaid mortgages but right now I'm feeling more empowered by the extra $22K in cash from my market investments.

To each his own, I guess.
 
2014-01-11 09:23:04 PM

Chagrin: While you were feeling safe with all of your equity tied up in your home last year, you might've noticed that the market went up 32%. Like you I could've paid off the $70K that I personally still have in unpaid mortgages but right now I'm feeling more empowered by the extra $22K in cash from my market investments.

To each his own, I guess.


While we're on the subject, my condolences for the $40K you lost in 2008, while I built $15K in equity with my modest extra cash.
 
2014-01-11 09:23:25 PM

Prophet of Loss: Smackledorfer: Prophet of Loss: A renter and a buyers start out ...

39 years later, the buyers defaults, loses everything put into the house and has ruined credit. The renter is still renting.

Who comes out ahead in this scenario? The bank.

You don't know how mortgages work, do you?

You assume the house is above water. That's a big assumption. Oh and fark you for your snide response. I'd say DIAF, but its not slow enough for the likes of you.


Lighten up.

What house is 39 years under water?
 
2014-01-11 09:24:01 PM

MikeyFuccon: The reason housing is so damn expensive in Britain is that private developers simply refuse to build enough housing stock to meet demand, unless you count the sheds that many new arrivals (to the Mail's horror) are forced to rent from unscrupulous homeowners. Whitehall needs to figure out why no building is going on and do something about it. "Easier" credit will just make things worse.


It's also about available land. In some places there just isn't any and demand is high. Places like Oxford have an insanely large greenbelt, 9 times bigger than the actual city. It's why they built the Bodleian's book store down in Swindon - it's cheaper to put it 25 miles away and have lorries travelling to get books than to try and build in or around Oxford.

Bizarrely, Oxford has horrific house prices but people seem to earn the same as Swindon, which I put down to this insane  religious belief by many people in England that buying an expensive house means they get an even bigger return, despite the farking interest they're paying.
 
2014-01-11 09:24:46 PM

Chagrin: While you were feeling safe with all of your equity tied up in your home last year, you might've noticed that the market went up 32%. Like you I could've paid off the $70K that I personally still have in unpaid mortgages but right now I'm feeling more empowered by the extra $22K in cash from my market investments.

To each his own, I guess.


Because my monthly mortgage is $250 but to rent my house would cost $1500 I actually have a lot more money to invest by buying. So by buying I own my home, get to stop paying after twenty five years, keep the asset AND have money left over to invest in the market. If I rented I'd have far less money to invest.
 
2014-01-11 09:25:30 PM

Yankees Team Gynecologist: Smackledorfer: Do you think the folks renting those condos aren't making money? As soon as they don't they will sell. If everyone is selling the price drops, and things soon return to property being worth buying.

Well, in theory large apartment businesses could be operating at a scale that allows for lower costs than individual ownership.  But $500k for a unit that's $1,800 to rent sounds steep--not necessarily calling bullshiat on trialpha, just saying that's probably not typical. Underscores the fact that every area is different at any given moment.


Agreed. Thus my use of qualifiers like on average and over time :)
 
2014-01-11 09:50:44 PM

Smackledorfer: The major point is that "nobody is renting out property at a loss" and that is almost always true. Note I discussed the long term.

Do you think the folks renting those condos aren't making money? As soon as they don't they will sell. If everyone is selling the price drops, and things soon return to property being worth buying.

You just live in such a high property value area that ownership is out of reach to the common man. It likely isn't a bad purchase, but merely an expensive one.


Hmm... perhaps I should clarify to be completely clear. There are two types of apartment towers in my area. The condo towers, where each unit is purchased by an individual owner, and rental towers, where a management company owns the building, and rents out each unit. Purchase price of a 2bdrm in one of the condo towers is around $500k. The rent for one of the units in the rental towers is around $1800/month.

I doubt the condo owners would be able to charge more than $1800, given that's what the rental apartments are going for, and they're basically the same thing - although the condos will be a little bit nicer. Now, there may be condo owners renting out at that price and making money - but that would only be if they bought years ago when prices were less insane. Someone buying a unit today and renting it out would lose money.

Anyway, my point was that, as of now, in my area, renting is cheaper than buying. Nor does it appear to be correcting back to the "buying cheaper than renting" state, as the condo prices are still going up. No, I don't understand it either.

Toronto. The newspapers have started to take notice - I've seen a bunch of articles recently pointing out that that the market is totally messed and buying may not be the best decision.
 
2014-01-11 09:56:56 PM

Flint Ironstag: I pay $250 a month mortgage. If I was renting I'd now be paying $1500 a month. In ten years I'll be paying $0 a month.


You're forgetting taxes - unless you live in an area that doesn't have them (does such a place exist?) - you'll never be paying $0 a month.

Unfortunate condo owners will also be paying those fees forever. They seem to go up faster than rent does - condo management companies appear to be even more incompetent than rental ones. I've seen listings for condos in my area with $1k/month condo fees. shiatty condos at that.
 
2014-01-11 10:05:13 PM

trialpha: Flint Ironstag: I pay $250 a month mortgage. If I was renting I'd now be paying $1500 a month. In ten years I'll be paying $0 a month.

You're forgetting taxes - unless you live in an area that doesn't have them (does such a place exist?) - you'll never be paying $0 a month.

Unfortunate condo owners will also be paying those fees forever. They seem to go up faster than rent does - condo management companies appear to be even more incompetent than rental ones. I've seen listings for condos in my area with $1k/month condo fees. shiatty condos at that.


I mentioned taxes in an earlier comment. Here taxes are paid by home owners and renters, so they have to be added to both mortgage payments and rent. So they make no difference to the comparison.
 
2014-01-11 10:11:51 PM

trialpha: Smackledorfer: The major point is that "nobody is renting out property at a loss" and that is almost always true. Note I discussed the long term.

Do you think the folks renting those condos aren't making money? As soon as they don't they will sell. If everyone is selling the price drops, and things soon return to property being worth buying.

You just live in such a high property value area that ownership is out of reach to the common man. It likely isn't a bad purchase, but merely an expensive one.

Hmm... perhaps I should clarify to be completely clear. There are two types of apartment towers in my area. The condo towers, where each unit is purchased by an individual owner, and rental towers, where a management company owns the building, and rents out each unit. Purchase price of a 2bdrm in one of the condo towers is around $500k. The rent for one of the units in the rental towers is around $1800/month.

I doubt the condo owners would be able to charge more than $1800, given that's what the rental apartments are going for, and they're basically the same thing - although the condos will be a little bit nicer. Now, there may be condo owners renting out at that price and making money - but that would only be if they bought years ago when prices were less insane. Someone buying a unit today and renting it out would lose money.

Anyway, my point was that, as of now, in my area, renting is cheaper than buying. Nor does it appear to be correcting back to the "buying cheaper than renting" state, as the condo prices are still going up. No, I don't understand it either.

Toronto. The newspapers have started to take notice - I've seen a bunch of articles recently pointing out that that the market is totally messed and buying may not be the best decision.


Either the folks who can afford these condos are all idiots, or they know something we don't and there is more value in buying than renting.

On average the only real advantage to owning over renting is money. People are stupid, but not stupid enough to all take on greater responsibility and tying up funds for shiats and giggles.

If you are correct, it will correct itself eventually.
 
2014-01-11 10:30:36 PM

Flint Ironstag: I mentioned taxes in an earlier comment. Here taxes are paid by home owners and renters, so they have to be added to both mortgage payments and rent. So they make no difference to the comparison.


Wait... what? Renters pay property tax in the same way owners do? ie. directly to the city and not indirectly via rent? Is the city getting a property tax payment from both the owner and the renter? That's... bizarre.

Anyway, here's your original statement and the additions I was implying:

"I pay $250 a month mortgage plus $X in taxes. If I was renting I'd now be paying $1500 a month. In ten years I'll be paying $X a month."
 
2014-01-11 10:42:10 PM

trialpha: Flint Ironstag: I mentioned taxes in an earlier comment. Here taxes are paid by home owners and renters, so they have to be added to both mortgage payments and rent. So they make no difference to the comparison.

Wait... what? Renters pay property tax in the same way owners do? ie. directly to the city and not indirectly via rent? Is the city getting a property tax payment from both the owner and the renter? That's... bizarre.

Anyway, here's your original statement and the additions I was implying:

"I pay $250 a month mortgage plus $X in taxes. If I was renting I'd now be paying $1500 a month. In ten years I'll be paying $X a month."


Well to be accurate it is actually:

"I pay $250 a month mortgage plus $X in taxes. If I was renting I'd now be paying $1500 a month plus £X in taxes. In ten years I'll be paying $X a month just the taxes either way."

And yes, the occupier pays the tax here, it is not included in the rent you pay. I pay £1200 a year Council Tax, about $1800. It is calculated in bands, with the most expensive being about $5000 a year, even if you owned Buckingham Palace as your private home. Link
 
2014-01-11 10:53:00 PM

Smackledorfer: On average the only real advantage to owning over renting is money. People are stupid, but not stupid enough to all take on greater responsibility and tying up funds for shiats and giggles.


There are other advantages, like being in control of your property - being able to paint it the color you want, plant what you want in the yard, and not have to accept a landlord entering the property to do an inspection.

On the other hand, there are expenses beyond the mortgage, taxes, and insurance, such as maintenance and landscaping.

Here, the mortgage and taxes are extremely reasonable, it's the insurance that's driving me up the wall.  Farking Rick Scott deregulating the insurance industry has allowed the insurers to dramatically raise prices year after year, up to 20% each year, and they're taking full advantage.  Of course, the insurers themselves are a huge hassle as they insist on insuring the home for far more than the loan value, and use their own voodoo calculations for replacement value that put it far above what it would actually cost to replace just so that they can charge higher rates.

I get that the bank has an interest in making sure the property is insured, but they have no reason to require that the property be insured in any way other than a cash value policy in the amount of the outstanding balance.  If I have $80K outstanding on my loan, I should be able to buy a policy that covers a cash payout of that amount so that the bank gets their money in the event that the collateral is destroyed, instead of a policy for $195K for a total replacement.  The bank shouldn't care if the insurance pays to replace it or just pays out the due balance.
 
2014-01-11 11:12:08 PM

rogue49: Just rent. Then you won't have to worry about the damn house...and you can go do something.


The problem with renting is that you're at the mercy of your landlord when it comes to a lot of things.  As example, back when I rented a house, my landlord wouldn't fix a thing unless it was covered by his home warranty.  So about a quarter of the windows had broken seals and the water softener that died was never repaired or replaced.  Worst was stuff that was dying, but not yet dead.  The home warranty repairmen would just band-aid things, so stuff eventually got bad again.

And there were about a dozen major improvements I would have liked to have done to the house, but couldn't.  I inquired if I could buy the house, but was turned down.  So I ended up moving out as fast as I could.
 
2014-01-11 11:14:11 PM

Flint Ironstag: Well to be accurate it is actually:

"I pay $250 a month mortgage plus $X in taxes. If I was renting I'd now be paying $1500 a month plus £X in taxes. In ten years I'll be paying $X a month just the taxes either way."

And yes, the occupier pays the tax here, it is not included in the rent you pay. I pay £1200 a year Council Tax, about $1800. It is calculated in bands, with the most expensive being about $5000 a year, even if you owned Buckingham Palace as your private home. Link


Huh. Does the owner of a rented unit not pay any taxes? If so, that's a nice incentive to be an owner - don't get that here. If they are also paying taxes, then the city/council are bastards and double dipping.
 
2014-01-11 11:15:46 PM

TuteTibiImperes: Smackledorfer: On average the only real advantage to owning over renting is money. People are stupid, but not stupid enough to all take on greater responsibility and tying up funds for shiats and giggles.

There are other advantages, like being in control of your property - being able to paint it the color you want, plant what you want in the yard, and not have to accept a landlord entering the property to do an inspection.

On the other hand, there are expenses beyond the mortgage, taxes, and insurance, such as maintenance and landscaping.

Here, the mortgage and taxes are extremely reasonable, it's the insurance that's driving me up the wall.  Farking Rick Scott deregulating the insurance industry has allowed the insurers to dramatically raise prices year after year, up to 20% each year, and they're taking full advantage.  Of course, the insurers themselves are a huge hassle as they insist on insuring the home for far more than the loan value, and use their own voodoo calculations for replacement value that put it far above what it would actually cost to replace just so that they can charge higher rates.

I get that the bank has an interest in making sure the property is insured, but they have no reason to require that the property be insured in any way other than a cash value policy in the amount of the outstanding balance.  If I have $80K outstanding on my loan, I should be able to buy a policy that covers a cash payout of that amount so that the bank gets their money in the event that the collateral is destroyed, instead of a policy for $195K for a total replacement.  The bank shouldn't care if the insurance pays to replace it or just pays out the due balance.


One would think the bank would be satisfied with a max of loan value.

My home appraised for replacement cost of almost twice what I bought it for.
 
2014-01-11 11:24:46 PM

trialpha: Flint Ironstag: Well to be accurate it is actually:

"I pay $250 a month mortgage plus $X in taxes. If I was renting I'd now be paying $1500 a month plus £X in taxes. In ten years I'll be paying $X a month just the taxes either way."

And yes, the occupier pays the tax here, it is not included in the rent you pay. I pay £1200 a year Council Tax, about $1800. It is calculated in bands, with the most expensive being about $5000 a year, even if you owned Buckingham Palace as your private home. Link

Huh. Does the owner of a rented unit not pay any taxes? If so, that's a nice incentive to be an owner - don't get that here. If they are also paying taxes, then the city/council are bastards and double dipping.



No, only the occupier pays the tax. The owner has to pay if is empty, but as soon as a tenant moves in they pay it. The landlord will have to declare any income as taxable, so they'd probably have to pay the income tax on the rent they get, after deductions.
 
2014-01-12 02:26:27 AM

Smackledorfer: The major point is that "nobody is renting out property at a loss" and that is almost always true. Note I discussed the long term.

Do you think the folks renting those condos aren't making money? As soon as they don't they will sell. If everyone is selling the price drops, and things soon return to property being worth buying.



Depends on tax policy and expectations for the market. In some places you get quite a bit of negative gearing of real property.
 
2014-01-12 03:00:13 AM

Monkeyfark Ridiculous: Smackledorfer: The major point is that "nobody is renting out property at a loss" and that is almost always true. Note I discussed the long term.

Do you think the folks renting those condos aren't making money? As soon as they don't they will sell. If everyone is selling the price drops, and things soon return to property being worth buying.


Depends on tax policy and expectations for the market. In some places you get quite a bit of negative gearing of real property.


Ok, I give up.

Houses are terrible, and everyone who buys them are idiots who are making poor financial decisions and hemorrhaging money. :P


Otoh, I have mentioned "long term" multiple times.  I meant ACTUAL long term, not stockholder 'looking past the next 3 months?!!!!' long term :)

A negatively geared investment property will generally only remain negatively geared for several years

An aside: rereading the thread, I realize that nobody mentioned deduction of mortgage interest, which is a huge plus for anyone in a higher tax bracket.
 
2014-01-12 03:54:04 AM

Smackledorfer: Monkeyfark Ridiculous: Smackledorfer: The major point is that "nobody is renting out property at a loss" and that is almost always true. Note I discussed the long term.

Do you think the folks renting those condos aren't making money? As soon as they don't they will sell. If everyone is selling the price drops, and things soon return to property being worth buying.


Depends on tax policy and expectations for the market. In some places you get quite a bit of negative gearing of real property.

Ok, I give up.

Houses are terrible, and everyone who buys them are idiots who are making poor financial decisions and hemorrhaging money. :P


Otoh, I have mentioned "long term" multiple times.  I meant ACTUAL long term, not stockholder 'looking past the next 3 months?!!!!' long term :)

A negatively geared investment property will generally only remain negatively geared for several years

An aside: rereading the thread, I realize that nobody mentioned deduction of mortgage interest, which is a huge plus for anyone in a higher tax bracket.



Yeah, in some countries people don't get that deduction, so in certain situations it can even make sense to rent AND be a (negatively geared) landlord. That's the thing about any "renting is foolish" or "houses are terrible investments" kind of statements; the reality is complicated, everyone's situation is different. And tax policy is a huge factor, as is the local rental/property market. Sure, negative gearing is meant to eventually pay off, but it is a gamble on future values. Someone who could buy, but rents, might just be making a different bet.

/owns a house
 
2014-01-12 04:17:39 AM

cannibalparrot: nekom: cannibalparrot:
I'm pretty sure that's false in most, if not all, states.  The mortgage encumbers the land, so while a person's surviving family doesn't HAVE to pay the debt, they do to get the land clear of the mortgage.

Only if the estate (if there even is one) has any interest in it.  If anyone tells you that you are responsible for a dead relative's debt they are lying to you and violating the law to boot.

That is, of course, unless the estate or surviving family wants to keep the land.  The bank has every right to seize it's collateral otherwise of course.

Yeah, I saw that in your post after I posted.  Again...that'llteach me to multi-task.Snarcoleptic_Hoosier: cannibalparrot: nekom: gremlin1: What happened to mortgage insurance? If you are disabled it picks up the payment or if you die it pays off the mortgage.That way you would not be passing on the debt to your children.

Debt dies with the debtor.  You don't pass down debt to your children.  Unless of course they want the collateral, then they would have to arrange to make payments on it, but they are under no obligation to do so.

I'm pretty sure that's false in most, if not all, states.  The mortgage encumbers the land, so while a person's surviving family doesn't HAVE to pay the debt, they do to get the land clear of the mortgage.

/IANAL(Y)

I thought the mortgage covered the structure, not the physical land.

It covers whatever the text of the mortgage documents says it covers, which in almost every instance includes the land and everything on/attached to it.


Mortgage covers it all. A home is a permanent structure on the land, otherwise it's a mobile home. If it's a mobile home, it's a loan rather than a mortgage, although the land could've been used as collateral, in which it would still be a loan not a mortgage. Not to be confused with non-site built homes with a permanent foundation to land which also qualify for mortgages.
 
2014-01-12 09:24:21 AM
When "buying is stupid" is common knowledge, buy.
When "renting is stupid" is common knowledge, rent.

Of course, what I mean is, "work out the numbers and give strong consideration to whichever one people think is stupid, and be prepared for people to call you stupid for a few years, after which time they'll shut up, and you can think to yourself that they're stupid."  Don't worry, though; a fair number of people will voluntarily call themselves stupid, except on-line, when they'll figure out some other reason to call you stupid.  Stupid.
 
2014-01-12 02:13:14 PM
You mean not everyone has a paid-off house and six figures in multiple accounts? What do you people do with your money? I bet you invest in gold or something. Maybe blow it all on shoes and hats.
 
2014-01-12 06:42:53 PM
you've got until you die. Have fun, dawgs!
 
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