Rent Vs. Buy housing

My mortgage was something like $180k and I live in a place with fairly low taxes and my monthly payment is ~$1300. Don't forget to calculate in taxes and escrow for your monthly payment because it is not insignificant. I think my payment towards principal + interest is like $900/mo. Also you have to pay FHA insurance since you're putting down so little up front. Everyone says renting is like pissing away money but between escrow and interest I'm pissing away almost as much per month as my rent cost me at my apartment.

IMO in your situation I'd get an apartment for a few more years and save some money to put down. At least 10%. Ideally 20%. It is advice I wish I was given. Luckily I'm in a situation now that I put an extra $1k per month directly towards my principal.

Are you planning on staying in the next place for at least 3-5 years? To me that's at least as big of a point to consider as rent vs. own price ratios, because transaction costs or a possible loss on the sale can throw everything out of whack if you have to move in 18 months. Also keep in mind that even if there's a difference of $500/month in rent vs. mortgage, does that also include property taxes, utilities, and anticipated maintenance? On the flip side of course is the fact that you're building equity in a home when you own, assuming your mortgage isn't anything too stupid (what is the amortization period)?

Lots of shit to consider.

I came close to buying a home several times, but I never did when I was single, and I'm glad I didn't. While I lived in basically the same metro area the whole time, I moved 5 or 6 times in the 12 years between getting done with school and getting married. I'm in my mid 30s now, and just got married last year, and my wife already owned a home, so we didn't have to mess with the hassle of trying to sell one of our homes, I was able to just move right in, no hassle other than waiting for my yearly lease to expire on my townhouse.

I do have some single friends that own homes, and for them it makes sense because they have dogs and need a big yard, or have kids, but I never had either so it never made sense for me. I liked the freedom to pick up and move every year if I wanted/needed to.

And from being a homeowner for a full year now, I really miss the ability to just call the landlord every time something needs to be fixed, and have it done for free. That is a HUGE convenience that you don't realize you'll miss until you have to shell out 5 grand for a new furnace/AC, or a couple grand for a new fridge. House maintenance is goddamned expensive.

joeboo_sl said:

And from being a homeowner for a full year now, I really miss the ability to just call the landlord every time something needs to be fixed, and have it done for free. That is a HUGE convenience that you don't realize you'll miss until you have to shell out 5 grand for a new furnace/AC, or a couple grand for a new fridge. House maintenance is goddamned expensive.

Click to expand...

Yeah, that's one of the reasons I enjoy condo living, and think people who complain about condo fees are idiots. Kind of a happy medium between renting an apartment and owning a detached house. Not to mention no lawns to cut or snow to shovel, that alone is worth $100/month to me.

Amortization period is one of the first things you should know about a mortgage. If you have a 30+ year amortization, you'll have barely made a dent in the principal owed even after 10 years. Definitely something to keep in mind. I think it's ridiculous to get a mortgage much past 25 years, personally. Unless you intend on making payments when you're retired.

Should note even if you have a 30yr amortization most mortgage companies have no penalty for early re-payment. I have a 30yr loan and yeah after paying the amount for a year noticing I payed virtually zero into the principal I started just throwing money at the principal outright. I think now I'm on track to have to done in about 10 years if I keep the payment schedule. I think if you're good with the payments and good with money in general the timeline you get from the bank is somewhat moot. I always keep way too much money in my savings account so I started just clearing that out and putting it into my mortgage. Which in a down market isn't the "smartest" way to "invest" my money but I know nothing about investing anyways.

I'm becoming more and more of a renting advocate every year. Some of my friends who live back in Ohio - where monthly expenses aren't nearly close to mine - seem like they're always facing a new dilemma every time another one gets sorted out that sets them back significantly. Mold in the crawlspace, rotting hardwood floors, new air conditioning unit/fridge/water heater, new roof. The list goes on and on and these are not cheap things to fix. I don't even change my own light bulbs. Sure, the amount of money I "throw away" per month is absurd. I pay more in a year than my cousin paid for his house in Buttfuck Nowhere, Ohio. But you know, it's Buttfuck Nowhere, Ohio and I couldn't deal with that lifestyle now.

I've rented apartments all over the world and six years ago finally took the plunge and bought a house-- it was probably one of the worst decisions I've ever made. Lulled into a false sense of security by the common claim that you are "throwing money away" when you rent, and that you'll "build equity" with a mortgage, I took the plunge and bought a brand new townhome for 369K in 2007.

Now before I get into all the unsung negatives of home ownership, I will say right off the fact that you having NO savings should automatically eliminate any thoughts you may have for buying a house. Even a few months of savings doesn't cut it in my opinion. Besides the need to potentially come up with thousands of dollars to tackle unforeseen repairs, upon move in you will find yourself burning through money on all sorts of things including toolsets, grass, lawnmowers, paint, etc. Not to mention things like furniture. Multiply this 3 fold if you are buying this house with a wife/girlfriend.

If you aren't in a position now to have surplus money to save at the end of each month, you definitely will not have any when you own a house.

In my case, the following items are big negatives to my home ownership experiences:

1) House dropped 40K in value during the great crash and still hasn't recovered.
2) Despite being brand new, I spent two years fighting with the builder to fix various issues with the house. We're talking serious shit like water leaking into the living room from roof when there was a heavy rain
3) Depending where you live, property taxes can be vicious. I pay $8500 a year in taxes...
4) No more concierge or management office to receive deliveries.
5) You gotta fix shit yourself ($) or call someone($$), AND be there while they do the repairs.
6) No human security and no amenities such as an exercise room

Now there are definitely positives such as not having to deal with idiot apartment neighbors or asshole building management, but home ownership imho is one of those greatly exaggerated "American Dreams". Now mind you I probably bought a house at the worst possible time in the last 80 years, but even without the loss of equity managing a house on my own is a big job, and I just think apartment living was a lot less time consuming and "easier".

Besides the fact that you need savings, you REALLY need to budget things out exactly. You need to take the mortgage payment, add property taxes to it, then bills, and then a solid monthly amount that tries to encompass repairs, home depot purchases, and necessary d?cor. That then is your REAL monthly cost. Don't get lulled into this false sense of security because you look at the mortgage payment plus taxes and say "its less than my rent", because it really won't be once you add in the million incidentals that will arise with home ownership

Ouch buying a new home in 2007. Really bad luck man

Deathwing_sl said:

A properly prepared landlord is adding those costs into the monthly payment. So, yes, you're paying for a new roof. The landlord can't just up and raise rent to cover the new roof because he'll lose the tenants to a competing rental. I suspect, perhaps subconsciously, you looked into housing prices in SF and convinced yourself renting was the right thing to do. And in SF, it probably is. No idea where porkchop lives.

EDIT: that was for AlexTheDictator

Click to expand...

All this is true and I wonder if renting is better for some people who don't generally keep money on hand. If I have less than $5k in my savings account I start freaking out and stop buying anything. I generally prefer to keep it around the 8-10k range, though, for peace of mind. So if something happens I have the cash on hand to deal with it. But with rent, like you said, you're just paying for the new roof little by little over the months.

Tenks_sl said:

Ouch buying a new home in 2007. Really bad luck man

Click to expand...

Yeah tell me about it, I closed on it two months before the big crash and hadn't even made my 4th payment before the company I was working for (finance company) laid off half the work force. Within a few months the down payment on my house pretty much got erased and I spent the next year having nightmares that I was going to get canned and my new house would end up in foreclosure. Ugh.. Which brings me to another negative.. If life goes to shit at the worst your are stuck with your apartment for a year and then you can downsize to something that fits your new budget. With a house sometimes you just can't sell.. There was NO way I could have sold my house from 2007-2009. Even now Id have to sell it at a loss and it's a buyers market..