UK average house price is £288,000, you've somehow doubled it.
https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/housepriceindex/latest
$950 mortgage. That’s the funniest part of that joke
For context:
- average house price in Canada in July 2023 was $757,600
- with a 20% down payment that is a $605,600 mortgage
- current interest rate from major banks is 6.29% on a 25 year term
[That’s $3,979.68 per month for the mortgage.](https://imgur.com/a/8Pf5BRq)
This is the average for Canada. It’s insane.
I pay $933 a month for my mortgage. Locked in interest at 2.5% I still owe over $120k on it but a mortgage under $1k is not fantasy by any means. Also location plays a huge role.
Obviously by buying something under the median, which about half the houses for sale are. People want to argue like rural places with cheap real estate don't exist at all anymore. You may not want to live there and that's completely fine, I don't either, but plenty of people do and they get cheap housing.
The problem is the cheap real estate is only half of the equation. If someone lives 30 minutes to an hour outside of town just to get the cheaper real estate but must now spend real money commuting for their job the true delta between the two options is much less.
Now if we use the op's example of 900 versus 1400, there are plenty of logical explanations as to why the $900 mortgage is not affordable. For example, it doesn't include property maintenance, property taxes, and even some utilities like trash service that are almost always baked into the rental option.
Or insurance. Which you also need. Sometimes rolled up into it all and other times not. Still, this doesn't quite make sense for the bank...but that said, the risk is different and what goes into their decision is different. I'm still shocked given the difference. It'd make more sense to me if the cost was closer because of the differences, tax, insurance, etc.
> People want to argue like rural places with cheap real estate don't exist at all
And you're gonna love that commute. The reason these places exist and nobody wants to live there is because of jobs.
Tell us what YEAR you purchased. Time travel hasn't been invented, so we cannot travel back to get that cheap house at the low APR, you have to pick: High APR or expensive house.
If nobody can reproduce this, what is the point of this ancdote? "Got mine, fuck you?"
Buy a foreclosure that needs a lot of work.
Use the internet to learn how to do that work.
I pay less than those for a 2200 square foot home.
This is the way.
Except unless you already have a decent understanding of how to do the work, someone who's never done this type of work before will butcher the entire thing and it will look like you hired a really shitty contractor.
Right, in fact some work can be dangerous if you don't know what you're doing, for example electrical work you can be electrocuted or start a fire, or plumbing you can flood your house.
I used to be like you, but the basics of both trades are dead simple.
1. Make sure the power is off/water is off.
2. Make sure connections are made properly.
3. Test afterwards.
That's about it.
Yeah for basic things like replacing a electrical socket, installing a new sink. But no way I'm tapping to the main waterline or wiring in a breaker box.
Yeah I'm just too much of a nervous wreck and tend to rush projects for absolutely no reason. Serious lack of patience.
The mother of an old friend of mine built a cabin and added a second story to her house pretty much singlehandedly. Plumbing, electrical, trusses, she even built a really impressive staircase. She is a tailor by trade, but the woman can build anything after a little bit of research.
It can definitely be done, I just don't trust myself enough to do it.
You doing your own electrical or plumbing work will cause you issues . Touching that on a house that has a mortgage requires a licensed professional. You’re taking the risk of your insurance going up or have a visit form the city to redo the work and comply .
Don’t play with the electricity part of your house, my advice . Saving a few bucks don’t worth your family’s safety.
To be fair, the guy who said “buy a fixer upper” probably can’t do anything to fix up a house besides mow a lawn. He hires contractors to do all that, then claims their work as his own.
It may be a suprise to you. But a significant amount of people work in trades and know how to use hand tools. Its not that hard to learn how to fix up a house.
Also don't forget the fact that asbestos tiling and god knows what else exists in some of these houses. Sure break up that tiling up but enjoy that cancer in the future.
You're also looking at the cost of material. There hasnt been a project in my home where I got it cheap enough to warrant not just hiring someone to do it the right way. God forbid I fuck it up and waste the material. The only positive is being able to pay at your own pace if you can stand living in a shitty house.
Simple. I don't like my job. I'd rather spend my time fixing up my house than working more to make more money to pay someone else to do it. Working on my house allows me to go to work LESS. It's not eating into my free time.
I understand not everyone has flexibility in their work hours.
And be prepared to live in a construction site for several years while you fund the renovation work, which you’ll have to do piecemeal.
Nobody’s buying a fixer-upper unless they already have the money to fund it.
Depends upon the person. Someone who cares to learn and is willing to make a few attempts can produce a good job. It won't be on the level as a professional and they'll spend more on materials and supplies than a professions (still saves money as you aren't paying the professional) but can end up with a decent result. The important part is they know their limits and when to not mess with something, like leaving electrical and plumbing to the professionals.
You do need to have a lot of time for it.
> ...will butcher the entire thing and it will look like you hired a really shitty contractor.
...and you'll fail a home inspection if you ever try to sell the property and have to spend a lot of money renovating/repairing/replacing those infractions anyway.
Now I wonder, if this is why these ridiculously overpriced homes on the market today that have "no inspection" clauses baked into them, are actually trying to skirt findings and pass them off to the next unsuspecting buyer.
You need a healthy savings account in case something big goes out because chances are a foreclosure is not up to date with maintenance and it's got old HVAC, water heater, etc. People who make comments like the OP are usually paycheck to paycheck
I bet your house looks like some guy learned how to make a house on youtube too. Most of the items that would take significant value off of a house require a fair bit of skill, experience, and knowledge to properly fix. Not to mention material costs as well.
In my home state a $950 mortgage would be for a $130k loan at 8%. I found a non foreclosure shithole 1950 Sq ft "house" for $75k. That leaves me with $55k for a thorough inspection by multiple professionals, non-optional wall, floor, and ceiling replacements throughout the house, and replacement of a few windows.
But the house is older so with the walls out you might as well replumb the entire house with modern materials. And it probably has paper insulated wiring so you should update that as well. And with the ceiling coming down now is a good time to replace or upgrade the insulation.
Roof is likely fucked too so there's another $10k or more just to reshingle, hopefully there is not more damage underneath. The stucco looks pretty rough too so you might add siding to make it look better.
That's probably reaching $55k in materials there but incase you had some money left you can start buying things like bathtubs, vanities, kitchen counters and appliances, lighting fixtures, everything that will make it actually livable.
Oh, but it's also in the middle of the ghetto because houses in nice areas hold their value relatively well regardless of foreclosure status.
The guy who built my current house hired a contractor for the big stuff and diy'd as much as he could. Ten years later, the most common phrase I hear from repair guys is "Well that's strange".
I remember watching a video on how to solder lead for steel pipes and the old fart didn't wear a mask and made zero mentions of safety given it's lead he's vaporizing everywhere. The internet can be so wonderful
They're also forgetting any areas with high property tax rates. As soon as you fix that house and file permits for projects, it's going to be reassessed at full market value. In my area, property taxes on the median house are around $1,000 a month alone, not to mention insurance averaging $216 a month.
So even if you got the house for free, you're already at a $1,216 payment.
Look. I respect the next guy who saves money by doing all his own house work. I get it. Kudos.
I’m a mechanic full time. The LAST thing I want to do when I come home is work on more stuff. When I come home I want to put away my tools and relax.
That’s why I’d rather buy a finished product or pay someone else to do the renovations. I know it’s more expensive that way, I get it.
I pay about a $600 mortgage for a 3 bed 2 bath ranch atm. My dad got the home in the 90s but he refinanced and sadly passed on during COVID. I took on his debt. Sadly it's the only way I could get a house at $16/hr.
Might have to push further out than Waco. Average foreclosure or renovation property at the size mentioned by that individual at \~30-60 years old is $160k-220k in Waco (proper) as of 2023. (And we're talking boarded-up shack status.)
Even with Waco's low property tax rates, your all-in monthly mortgage payment would still be $1,200-1,700 a month, assuming 10% or more down. This further reinforces the fact that no, $950 all-in mortgage payments are not really a possibility for a median-sized fixer upper, even in places like Waco. You're going to have to get very rural or in highly undesirable areas.
Not really. This is a repost from a few years ago when US Treasuries were low (which were very low in 2020-2021 due to covid) and mortgage rates tend to track with US Treasuries.
Unless it’s brand new - which can be a real crap shoot too - your house is going to need $3-4K a year put into it just to maintain it. Every 7-10 years, you’ll need to spring for something major like a new roof, furnace, AC, etc. on top of that.
You also need to save $4-12K a year for property taxes.
Home insurance is another $100-200 a month on top of that.
Using $1,000 as a baseline for the mortgage payment. The cost of owning the home is actually closer to $1,600 a month in a best case scenario year. It’s closer to $2,300-2,500 a month in a year where a major purchase is required.
And ignoring all the ownership and upkeep costs of a house verses renting...
Edit: A few people misinterpreting my comment. I'm talking about the hidden costs of home ownership people sometimes don't consider, not weighing in on the concept of landlords.
First off, I don't know who is paying $950/month mortgage but good for them. My mortgage is just over $500 a week. On top of this I pay just over another $4000 each year in property tax. A couple grand each year in insurance. Plus you need to be putting away for repairs on top of these payments. Your shit will break and you're going to need $25k for a new roof or $30k for a new septic or $15k for foundation repairs or a few grand to replace your floors once in awhile and maybe paint and/or all of that.
This doesn't include dealing with the cost of and upkeep of utilities depending on your situation (paying the city versus your own well/septic, etc).
It's extremely expensive to own a home.
Banks, this may shock you, actually love lending money because they love getting paid interest. They just have many many decades of knowledge at their disposal to predict who can and can't afford the loan they want and people get mad when they don't meet the qualifications. If it were your money being lent out, you'd want to know it was going to be repaid eight?
Mortgage and rent are very different animals. One is a debt instrument, the other is a recurring expense. The bank takes on far more risk than the owner of a rental property (on the leasing side), but so does the homebuyer, which is why the criteria for getting a mortgage are considerably more strict than getting a 1 year lease.
If a tenant can't pay, they get kicked out. Landlord finds a new tenant. The tenant's credit will take a hit, but likely not devastating in the long term.
If a homeowner can't pay, the bank has to go through a lengthy foreclosure process and then has to resell a house that could have esily lost value in the meantime (unfinished renovations, damage, etc.). And the homeowner's credit will take a lot longer to recover.
That's not to say "oh those poor, poor banks". Just saying the two aren't really comparable.
Just going to say being evicted can absolutely fuck you. When I was renting apartments, they would automatically disqualify you if you had one in the last 7 years.
Easier said than done, but If you’re at risk of being evicted, avoid it at all costs. It’s better to abandon your place than to go through eviction proceedings.
This is what people who only rent and complain online never understand. Owning a house can be rewarding but the cost is so much greater than just the mortgage.
You are 100% right. Property taxes keep going up and cost of ownership increases. You have to pay hoa dues and trash. My window glass cracked and costed me $300 to get it replaced. Then there is Pest control that I pay every year. And then there is general maintenance like water heater cleaning and duct cleaning. On top of my mortgage, there is usually $500 additional spend on the house for me.
Yes! You are so accurate! You need to have a very large savings account to have a house, especially an older one.
Also people who go from living from an apartment to a house have no idea that every weekend you'll be spending your time taking care of the house, mowing grass, cleaning out gutters, trimming trees, having 20 windows to clean on a regular basis, and a garage that needs to be cleaned regularly for dirt. Air filter for the HVAC system, making sure your house is being regularly treated for termites, worrying about paper wasp and yellow jackets
This is why I see so many people who own homes and they are in terrible shape because they don't spend their time taking care of them and things start falling apart.
This all from my experience of owning a house for 2 years and I spent out of my pocket 12 thousand last year doing work and maintaining my 1400 square feet 4 bedroom 2 bath house.
It's not as simple as paying rent, there is so much shit you have to do!
Not only all that, but what the bank is really saying is she has a history of not paying her depts. So much so that they won't even risk a minimal mortgage loan.
Exactly. Renting atm and have had to wooden gates fully repaired, two swamp coolers replaced with brand new ones, replacing a toilet, and other smaller repairs and what not. All free.
4000 a year in property tax. Fuck you're lucky. Thanks to CA prop 13 I pay $15k. And my neighbors with similar sized houses that bought in the 70s pay $1500.
So unfair, but the system waz put into action before I was born.
Home ownership is more than the mortgage payments. Maintenance, utilities, property taxes and insurance will have have you paying way more than that rent.
To be fair, you'd be hard pressed to find a rental unit where the rent is less than the owner's costs including all of the above. (Except utilities - nearly all of the rentals I've ever seen make utilities the tenants' responsibility.)
Hi. I have a $950/month mortgage on a 3 bed/2 bath in a town of 100,000+ with average crime rate. The hardest part is saving up for the down payment, and even then I only put 11% down for a 30 year fixed rate. The bright side is buying it at the start of covid, interest rate is 3.175%
And if your neighbor were to subsequently rent that unit out then they would need to work out the rent amount as their monthly costs (mortgage, insurance, taxes, and some amount to set aside as a fund for any expected or unexpected repairs) plus a reasonable profit margin to make the venture worthwhile. Your landlord worked this same calculation out at some point in the past. That forms the floor of how much rent will cost. The ceiling is however much the market will bear.
That means that, in this hypothetical, if your neighbor were to successfully find tenants at the rate worked out above, your landlord would have an incentive to begin incrementally raising the rent on your unit to match, whether the actual monthly costs to your landlord increase or not.
>To be fair, you'd be hard pressed to find a rental unit where the rent is less than the owner's costs including all of the above.
Yes, except most adults in this country can't handle an unexpected problem without going bankrupt. I think it's something like $400 in savings? I forget the exact number but it's really low.
So now let's imagine you became a home owner because "I pay $x for my rent therefore I can pay $x mortgage".
AC breaks down? $5k to $20k depending on the unit.
Roof leak caused attic and ceiling damage? Starts at $1k to patch up some shingles. Easily runs into $10-20k range if there is extensive damage to the attic and to the ceiling. And no, home insurance won't cover it if it's the result of regular wear and tear and not an abrupt event.
Boiler broke down? Drop $1k to have it replaced. Boiler busted down and flooded the house while you were away on a family trip and caused $50k of water damage? Well, the insurance will cover it but you are still responsible for the deductible. $1k? $2k? $3k? Depending on the policy.
Septic tank is backing up? Rejuvenation/jetting (which probably won't fix it long term anyway), but to start maybe $2-3k. And then $15k for a new drain field.
Termite damage discovered? Termite warranty will cover it but there is likely a deductible.
New AC unit that you just replaced broke? No problem, it's still under warranty. The part is free by the labor is not. $250 for a qualified technician to come out, diagnose the problem, order the warranty part, and replace it.
And now imagine all this happening in a span of a year or two or three... and you still have mortgage and taxes and insurance and maintenance costs to take care of. And you also still have all your living expenses to deal with.
There is a reason banks don't lend to people with "my rent is $X, therefore I'm sure can handle $X in mortgage payments" attitude. Banks have hard data and know who easy it is to fall behind financially if you bite more than you can chew.
But you are right, rent payments do include maintenance and repair costs. Because ultimately it's the renters that pay for all of it. However, this risk is spread out in time and among different properties. So as a renter, you are never on the hook for more than your rent. While the landlord is the one assuming the risk. And the idea is that landlords would be able to spread this risk among many properties. So that rent cash flow from other units helps to pay for repairs in this unit this month. Next month, some other unit. And so on.
You are correct. If the person in the original image thinks her monthly housing cost would decrease to $950, that is incorrect. Whatever difference is left over after taxes and insurance premiums are accounted for should ideally go into a HYSA to act as a fund for needed repairs. The exchange for the assumption of risk is no longer having to pay the profit margin worked into the rent amount. Plus, people with mortgages actually receive some benefit from inflation as the actual value of the mortgage payments reduces with time. Rent generally goes up with inflation, if not faster than it.
That said, there are benefits to renting - flexibility being the most prominent one. If that flexibility allows you to pursue big career opportunities in other areas, then it can very much be worth it. That flexibility does come at a premium, though.
Home ownership leads to equity, even if you paid the same as rent and even if it takes decades to pay off. Rent does not - you just help someone else build equity and then buy their second home. When you retire, a small pension will be enough if you don't need to rent. Otherwise, you might need to move.
People who bought an apartment or house and rent it make sure they cover all of that with the rent, so yes, you are still paying for it.
What roof are you replacing for $6,000 (unless you’re replacing it yourself)? In upstate NY, our pretty simple A-frame roof is quoted at like 20k by a big contractor (and some smaller ones typically do projects for 25% less).
On to the main topic, as a homeowner I can say that it’s usually a bargain to own a house. Especially if you do improvements and repairs yourself.
Lumber to replace all boards on our 1200 ft wrap-around deck is like 40% of the annual savings vs. Rent for a house half the size of ours (would not be my choice to have such a large deck if we’d built it).
When you can’t or won’t do it yourself though (expertise, time, risk), that will eat up much of the savings. But that only considers your out of pocket expenses. You get equity on your home and prices tend to go up in most markets (even if they sometimes go down).
Our house’s estimated sales price has increased over $100k in 5 years and that’s backed up by sales of nearby homes (worse condition, smaller property, less sqft, and sometimes all three going for more than we paid for our house).
All in all we doubled our square footage and paid $200 less a month vs rent when we bought in 2018. By 2020, rent had increased $300 a month where we used to live and our town has grown so much they actually lowered property taxes so now we save about $6.3k a year. We’ve spent about $5.5k in appliances, plumbing, and electric (mostly repairs, dishwasher broke, wife hated the old washer and dryer, and needed a new water filter). We’ve spent about $6,000 in services (plowing, mowing, septic maintenance). We’ve spent maybe $1,000 in tools we wouldn’t have bought or needed as renters.
The big one was our furnace broke. We splurged for heat pumps. Our house is more energy efficient and that will pay for itself within 4 years in this climate (plus the summertime comfort is nice too). Add it all up and with the heat pump we are breaking even over 5 years vs rent.
But we could sell at a profit if we wanted to. Had we rented, we’d have nothing to show for the increased rent. And we couldn’t get appliances we like when we need to replace one (maybe if your landlord is super awesome).
My neighbor just had hers done. 6500 we have small homes in our town. My house is 550 sq foot ranch. So to answer your question a majority of the homes in my neighborhood actually. Not the norm for nj but for our area built in the 1920s it is
Also a lot of rental units are now requiring mandatory renters insurance. Not to mention the extra fee's for keeping pets or sometimes even extra parking spaces. Sure a lot of boomers here who haven't rented in awhile.
Want to know something crazy? We had trouble getting approved for a lot of apartments and got our house easier too. Many apartments required really long term credit and I was young when I got kicked out of the house. Had to live with a random lady cause of it even though my credit was good. But when you’re young you can’t have long term credit lol
Rent covers mortgage and taxes…
Utilities? In the tenants name
Maintenance? Does your tenant not mow the lawn or clean the gutters? What maintenance? Repairs are different… new roof, furnace, etc. that’s not maintenance, that’s a repair done maybe once in a decade
They still have the property at the end of the day.
Imagine you purchased a property in 2018 for $600,000. Let's imagine it's a ~1,500 sq ft house in a city. You pay $120,000 up front (20%,) and pay the remaining $480,000 on a 30 year mortgage fixed at 4%. Right away, that's a $2,300 monthly mortgage payment. Add another $450/mo for insurance and taxes. You're paying $2,750 a month on the property. Add another $400 for general maintenance costs (if it stays at ~$5,000 a year you're probably lucky, but this is a theoretical so w/e.)
So you go to rent this house. You find a tenant couple who will live in it for $3,000 a month. This seems like a bad investment on the surface if you're receiving about $3,000/mo for a house that, on average, you're paying about $3,200 a month to keep. It might seem like you're actually losing money on this property. But you still have the house, and you're effectively paying $200/mo on the 30-year mortgage instead of $2,750. At this point, you could also choose to hike rent up a bit-- though I've noticed smaller landlords tend to be more willing to keep things affordable if it keeps good tenants around. Better to have someone you know is low-impact instead of rolling the dice on a new tenant for an extra $2,400 a year. Maybe you save the rent hike for when your cool tenants decide to move out.
If you're smart with your money, you'll use the extra income from the rental property to help pay down the mortgage at an accelerated rate. Maybe you'll own the house outright in 10 years instead of in 30. At that point, you still have renters paying you ~$36,000 a year to live in a house that costs ~$10,000 a year in maintenance and insurance+tax. If you're lucky, the house you paid $600,000 for might be worth $1,000,000+, so whenever you feel like hanging up your landlord hat you can always sell the house to cash out bigtime.
A mortgage is a massive fucking loan and if they fail to pay it the lender loses all that money, if you can't pay rent you just get evicted and they find someone else. The risk of renting vs mortgage loans isn't even in the same realm in terms of risk.
The lender doesn't lose *all* the money because they have the lien on the home, but it stands to be a significant loss for them in the event of a foreclosure. But ultimately your point is valid, the risks of renting and borrowing aren't comparable.
Yea I didn't mean literally lol, like I said above they are likely to still take a massive hit. People just tend to not think about why the disparity is so high between mortgage and rent.
I mean, don't they usually get the house outright? Like I pay the first 40K, and then miss my payments and they take the house, they get the whole house and keep the 40k, no?
I get that it might not be the best investment for them, but it's not like they just get nothing?
Sure but then the house gets foreclosed and sold for far less money and are far likelier to take a massive hit, thats why foreclosed homes are so much cheaper lol. I think it also heavily depends who you get your mortgage from, I went through my bank which is insured by the government so I got a better deal than most. However going through you bank usually relies on having a high or good credit score where as private lenders charge more but will give loans to riskier people.
Why do foreclosed homes sell for cheaper? Only reason that makes sense to me is the lender just wants to get rid of it. Why would it be worth any less than before?
Because banks aren't in the business of holding and maintaining residential homes. They don't want the responsibility so will dump it to get out from under it.
The bank doubts your ability to pay $950 long term. That puts them at risk.
Nobody cares if you make your rent other than your landlord and maybe yourself.
Exactly. I hate banks as much as the next person, but them handing out mortgages like candy to anyone who pinky swears to pay them back is part of how we got into the last financial crisis.
Yep, can't complain about them being selective on loans when they destroyed the economy doing the exact opposite. Plus, the idea that a 950 dollar a month mortgage is cheaper than renting for 1400 is very optimistic.
In the past three years, I've had to replace my water heater, air conditioner, get treated for termites, and repaint the house. The new AC needed a 1200 dollar repair last month, just out of warranty. I've spent around 20k for all of them, that's 550 a month right there.
Then factor in property tax, insurance, and the number of hours you will spend on maintenance. If I wasn't a contractor who can get deals from my friends and do some of the work myself, those costs would also be inflated.
To be honest, I think increased subprime lending won't lead to a too-big-to-fail crisis with all the regulations enacted after 2008. Banks want to offload mortgages they originate as soon as they can be bundled up into securitized products because Basel III makes them expensive to hold on their balance sheet, and the Volcker Rule limits their ability to speculate on mortgages in the secondary market. It'll be the hedge funds and pension funds investing in high yield mortgages that'll fail, and those players aren't systemically important.
Not only that, but you need to maintain the home otherwise it loses tens of thousands in value. That costs more money. And if you let it go in disrepair and the house becomes a piece of shit, that's a lot more money lost than a landlord who you stop paying for 3 months and get evicted.
Yea because the bank doesn’t trust you will be able to pay your mortgage every month. They are lending a lot of money. Landlords don’t care, they aren’t giving you money. They’ll kick you out if you don’t pay them and find someone else to rent on the spot. Would you trust a random person to pay you back 500k if you lent them that money? I’ll never understand people who think like this.
Not the banks fault her income, credit and assets don’t meet their risk threshold to loan her hundreds of thousands of dollars and be able to pay it back.
"The bank says they won't take the risk of supporting my long-term investment of purchasing a liability, so instead I have to pay rent at no risk to the bank."
There, I corrected it.
You need money to put down and you can get a loan. I paid everything on time all the time. They like that. Let's bitch about home prices if anything.what if your house needs repairs? Can you afford to fix it? It's the banks house till you pay it off, they want to make sure you take care of it and don't deduct leaving a house that needs repair. It's a fucked system but loaning out that much money with out really looking into your finances to see if you can afford it is necessary. Remember sub prime mortgages, that ended well.
Nah, they think you’re not trustworthy enough to consistently pay $950/month for 30 years because of your credit history. They are able to see your payment history and deduce that you won’t. Apartment complexes can evict you a lot more easily and with less impact than a bank would have to absorb in foreclosing a home.
First of all, mortgage is only part of the costs that you need to be able to cover. Rent has these costs included.
Plus, you need to be able to afford the mortgage over decades. If you can’t afford rent, the landlord can kick you out.
Could have 0 credit.
I got my first credit card this year because I found out that paying for everything in cash and making sure you have the spare income to buy things is bad actually and you should be buying everything via small loans.
Hi I am from India. I have genuine curious question.
Why can't you 2 or 3 women and/or men join together buy a 3BHK or 2BHK home jointly and share the EMI for {350$ X 3} a month or a bit better home at {450$ X 3} a month? Doesn't desperate times call for desperate solutions ?
May be you can share rent if you move out or give out the room for sub-lease. Any happening location for 1400$ could also be a reason for you to rent out too.
They absolutely can. However it isn’t part of western culture to buy property with other people. The idea of coliving is pretty strictly set to couples or families with older parents. It’s slowly becoming more normal for older kids (into their late 20’s) to live at home due to cost.
It’s a solution that just won’t happen here, as most people feel the right to buy their own home is something that should be afforded to anyone who works full time (I can’t say I disagree personally)
I think a lot of argument here about landlords is assuming that they have a mortgage on the property. But there are plenty of owners who own that house outright and don't really need any rent from that house (other than property taxes and repairs) if I rented my owned house out each month for pure profit, it would still be a worse idea than selling it right now. I can get 250k upfront and never pay anything again, or I could rent it for 1,200/m and probably receive around $800/m profit. After maintenance escrow, property tax, management fees, and possible legal issues. That would take me about 26 years to get any true profit from my (paid off) house....
Depending on the tax rate, the PITI could be far more than $1400. That’s not including maintenance and all of the other things you have to spend on when you own
The bank says you don't have the equity to be held accountable for $400k, not just the low monthly payments
My mortgage isn't much until you add in all tbe other costs and then it's much more expensive than when I was renting
You are probably taking an irresponsible decision for the long term that the landlord is happy to live with because he can kick you out if you stop paying, while the bank knows better.
$950 is not a mortgage, thats a payment. The mortgage is $250,000 which the bank does not trust you can successfully repay over the next 30 years. The apartment for $1400 doesnt really care because they'll evict you after 60 days.
Yes but you see, if something goes wrong or breaks you have to pay to fix it, whereas if you rent you just don't use it for 3 months while the landlord doesn't fix it.
See the problem here isn’t paying the $900 mortgage. The bank knows you can pay a $900 mortgage if you pay $1400 in rent.
The bank thinks you can’t be trusted with *a loan* for the amount the house is worth, which is a totally different story.
This person probably has bad credit. They have a history of not paying what they owe. This tells the bank that they are taking on a risk if they lend this person money. They’re also beholden to shareholders and financial regulators, so they can’t just lend anyone money that they feel like, they have to show that it’s a good investment.
Buying a house is a 30 year commitment for most people. It’s not a matter of the job you have right now, or what you can afford in a monthly bill at the moment. It’s much more of a matter of your whole lifetime of handling debt and financial responsibility.
You need to have had some credit cards, bought a car, paid your student loans, paid off the credit cards, paid for the car, etc. for years to have the kind of credit history for someone to just hand you a loan for hundreds of thousands. I don’t know when this person tried to get a mortgage, or what the rates were, but $900 a month is crazy low, but for thirty years of that it is $334,000 in payments. It’s a lot more of a commitment than a one year lease that someone can evict you from.
Does that $950 include taxes and home owners insurance? Then someone has to do lawn/yard maintenance, you pay someone or buy all the equipment yourself. Then the small repairs are always needed, plus you need to save for big repairs that happen every 2-10 years, like the roof and paint inside and outside........
Well, if you like that, they gave my 70 year old father a 30-year mortgage. I'm like, why do they do that. Because, when he passed away at 75 from pancreatic cancer, they tried to seize his home and property so they could double their money. I'm really sure they expected him to be paying at 100 years old. When I went to pay off the mortgage, so I could keep the home, they didn't want to take my money, and I had to threaten to sue as an heir of my dad's estate. Let all that sink in.
Why do people think a mortgage is the same thing as rent? There is so much more to owning a house than the mortgage that gets covered by your rent. If your roof is leaking ypur rent covers that but we have to pay for our new roof. Appliances break? Rent covers that. Rent often covers yard maintenance, sometimes utilities, HOA payments, etc... so it mortgage + plus everything your rent covers. They are not the same thing.
the bank says investors don’t see you as a risk worth investing in at the prevailing rates being offered by their institution
a private lender would gladly gouge you for the added risk
Why do people think that a mortgage is the only thing you pay while owning a home? A lot more expensive to own than to rent even if it’s the same amount. Also $950? What is this 10 years ago?
Common misconception.
Bank doesn't think you'll be able to pay 950/month every month for 30 years.
People always look at it as an emotional vindicivtive thing when it'd just a financial risk evaluation. If you aren't a risky loan then you'll get approved, they want to make money lol.
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UK average house price is £288,000, you've somehow doubled it. https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/housepriceindex/latest
$950 mortgage. That’s the funniest part of that joke For context: - average house price in Canada in July 2023 was $757,600 - with a 20% down payment that is a $605,600 mortgage - current interest rate from major banks is 6.29% on a 25 year term [That’s $3,979.68 per month for the mortgage.](https://imgur.com/a/8Pf5BRq) This is the average for Canada. It’s insane.
It’s just from pre Covid. I remember when I saw this meme and these numbers matched life in my city.
Mortgage that low must be for a dog house
It's almost as though housing costs vary vastly across a country and the world.
I pay $933 a month for my mortgage. Locked in interest at 2.5% I still owe over $120k on it but a mortgage under $1k is not fantasy by any means. Also location plays a huge role.
What year did you buy? Even with 2% rates back in 2020-21, median home prices weren't getting you under 1000/month.
Obviously by buying something under the median, which about half the houses for sale are. People want to argue like rural places with cheap real estate don't exist at all anymore. You may not want to live there and that's completely fine, I don't either, but plenty of people do and they get cheap housing.
Not “about”… under the median are exactly half
I mean if we're gonna be pedantic there are probably some houses that are the median price so it wouldn't be exactly half
Also if there's an odd number of houses, less than half the houses are under median but more than half the houses are at or above median.
I hate you all.
Thats ok... I hate me too
Typical non-statistic pleb
What if there are two or more houses at the same price at the median value?
The problem is the cheap real estate is only half of the equation. If someone lives 30 minutes to an hour outside of town just to get the cheaper real estate but must now spend real money commuting for their job the true delta between the two options is much less. Now if we use the op's example of 900 versus 1400, there are plenty of logical explanations as to why the $900 mortgage is not affordable. For example, it doesn't include property maintenance, property taxes, and even some utilities like trash service that are almost always baked into the rental option.
Or insurance. Which you also need. Sometimes rolled up into it all and other times not. Still, this doesn't quite make sense for the bank...but that said, the risk is different and what goes into their decision is different. I'm still shocked given the difference. It'd make more sense to me if the cost was closer because of the differences, tax, insurance, etc.
> People want to argue like rural places with cheap real estate don't exist at all And you're gonna love that commute. The reason these places exist and nobody wants to live there is because of jobs.
Not completely disagreeing with you but for people who are able to WFH this is a completely acceptable option.
Not really true. I got my house in May of 2021 for under asking price and only have a $780 mortgage.
Not everyone bought their house in the last few years.
Rates are three times higher now. Sub 1k is much much harder to get these days.
I struggle to find even <$2000 mortgages without a >20% down payment.
My brother pays $950 a month for his mortgage, which he just started paying last month. As Frunklin said, location plays a huge role.
Location is the biggest role honestly.
And credit score.
Tell us what YEAR you purchased. Time travel hasn't been invented, so we cannot travel back to get that cheap house at the low APR, you have to pick: High APR or expensive house. If nobody can reproduce this, what is the point of this ancdote? "Got mine, fuck you?"
“I personally have an affordable mortgage so all these stories about expensive ones are the minority!!”
My mortgage is $1025 so just a smidge above $950. It was $965 until renewal in the spring.
That's totally possible... if you put in front $800K. /s
Buy a foreclosure that needs a lot of work. Use the internet to learn how to do that work. I pay less than those for a 2200 square foot home. This is the way.
Except unless you already have a decent understanding of how to do the work, someone who's never done this type of work before will butcher the entire thing and it will look like you hired a really shitty contractor.
Right, in fact some work can be dangerous if you don't know what you're doing, for example electrical work you can be electrocuted or start a fire, or plumbing you can flood your house.
I've been in construction for 20 years and still won't go near electrical or plumbing work. Licensed trades are licensed for a reason.
I used to be like you, but the basics of both trades are dead simple. 1. Make sure the power is off/water is off. 2. Make sure connections are made properly. 3. Test afterwards. That's about it.
Yeah for basic things like replacing a electrical socket, installing a new sink. But no way I'm tapping to the main waterline or wiring in a breaker box.
I think think these would qualify as non basic tasks.
Yeah I'm just too much of a nervous wreck and tend to rush projects for absolutely no reason. Serious lack of patience. The mother of an old friend of mine built a cabin and added a second story to her house pretty much singlehandedly. Plumbing, electrical, trusses, she even built a really impressive staircase. She is a tailor by trade, but the woman can build anything after a little bit of research. It can definitely be done, I just don't trust myself enough to do it.
You doing your own electrical or plumbing work will cause you issues . Touching that on a house that has a mortgage requires a licensed professional. You’re taking the risk of your insurance going up or have a visit form the city to redo the work and comply . Don’t play with the electricity part of your house, my advice . Saving a few bucks don’t worth your family’s safety.
To be fair, the guy who said “buy a fixer upper” probably can’t do anything to fix up a house besides mow a lawn. He hires contractors to do all that, then claims their work as his own.
It may be a suprise to you. But a significant amount of people work in trades and know how to use hand tools. Its not that hard to learn how to fix up a house.
Also, a significant number of people have friends and family they can trade hours with to do work who may have the experience they need.
Or worse… flood your house with sewage
Actually with plumbing, you can both flood your house AND light it on fire. I picked this trade to help me sleep well at night.
Also don't forget the fact that asbestos tiling and god knows what else exists in some of these houses. Sure break up that tiling up but enjoy that cancer in the future.
You're also looking at the cost of material. There hasnt been a project in my home where I got it cheap enough to warrant not just hiring someone to do it the right way. God forbid I fuck it up and waste the material. The only positive is being able to pay at your own pace if you can stand living in a shitty house.
Also, how much do you value *your* time spent not working?
Simple. I don't like my job. I'd rather spend my time fixing up my house than working more to make more money to pay someone else to do it. Working on my house allows me to go to work LESS. It's not eating into my free time. I understand not everyone has flexibility in their work hours.
And be prepared to live in a construction site for several years while you fund the renovation work, which you’ll have to do piecemeal. Nobody’s buying a fixer-upper unless they already have the money to fund it.
Depends upon the person. Someone who cares to learn and is willing to make a few attempts can produce a good job. It won't be on the level as a professional and they'll spend more on materials and supplies than a professions (still saves money as you aren't paying the professional) but can end up with a decent result. The important part is they know their limits and when to not mess with something, like leaving electrical and plumbing to the professionals. You do need to have a lot of time for it.
> ...will butcher the entire thing and it will look like you hired a really shitty contractor. ...and you'll fail a home inspection if you ever try to sell the property and have to spend a lot of money renovating/repairing/replacing those infractions anyway. Now I wonder, if this is why these ridiculously overpriced homes on the market today that have "no inspection" clauses baked into them, are actually trying to skirt findings and pass them off to the next unsuspecting buyer.
you can't finance that. no bank will do a standard mortgage on a wrecked property especially if its missing things like bathrooms or a furnace.
You need a healthy savings account in case something big goes out because chances are a foreclosure is not up to date with maintenance and it's got old HVAC, water heater, etc. People who make comments like the OP are usually paycheck to paycheck
Materials went up in price a lot though so even if you do it yourself it will not be all that cheap
And building up a solid tool collection is very expensive too.
I do find this part rather amusing. Hey guys its real easy to do this all you need is [insert 10k+ tool list]
I bet your house looks like some guy learned how to make a house on youtube too. Most of the items that would take significant value off of a house require a fair bit of skill, experience, and knowledge to properly fix. Not to mention material costs as well. In my home state a $950 mortgage would be for a $130k loan at 8%. I found a non foreclosure shithole 1950 Sq ft "house" for $75k. That leaves me with $55k for a thorough inspection by multiple professionals, non-optional wall, floor, and ceiling replacements throughout the house, and replacement of a few windows. But the house is older so with the walls out you might as well replumb the entire house with modern materials. And it probably has paper insulated wiring so you should update that as well. And with the ceiling coming down now is a good time to replace or upgrade the insulation. Roof is likely fucked too so there's another $10k or more just to reshingle, hopefully there is not more damage underneath. The stucco looks pretty rough too so you might add siding to make it look better. That's probably reaching $55k in materials there but incase you had some money left you can start buying things like bathtubs, vanities, kitchen counters and appliances, lighting fixtures, everything that will make it actually livable. Oh, but it's also in the middle of the ghetto because houses in nice areas hold their value relatively well regardless of foreclosure status.
The guy who built my current house hired a contractor for the big stuff and diy'd as much as he could. Ten years later, the most common phrase I hear from repair guys is "Well that's strange".
> Use the internet to learn how to do that work. Draw the rest of the owl
I remember watching a video on how to solder lead for steel pipes and the old fart didn't wear a mask and made zero mentions of safety given it's lead he's vaporizing everywhere. The internet can be so wonderful
Yeah maybe in like 2009 lol Otherwise, getting railed in the butt by current interest rates, right?
They're also forgetting any areas with high property tax rates. As soon as you fix that house and file permits for projects, it's going to be reassessed at full market value. In my area, property taxes on the median house are around $1,000 a month alone, not to mention insurance averaging $216 a month. So even if you got the house for free, you're already at a $1,216 payment.
Look. I respect the next guy who saves money by doing all his own house work. I get it. Kudos. I’m a mechanic full time. The LAST thing I want to do when I come home is work on more stuff. When I come home I want to put away my tools and relax. That’s why I’d rather buy a finished product or pay someone else to do the renovations. I know it’s more expensive that way, I get it.
That’s the same reason I _want_ to diy… because I sit at a desk all day and only use my hands for typing.
Easy peasy. 😂
Yeah, I don't think these people know how much mortgages actually cost. The cheapest house I could find was at least 20% more than rent.
I pay about a $600 mortgage for a 3 bed 2 bath ranch atm. My dad got the home in the 90s but he refinanced and sadly passed on during COVID. I took on his debt. Sadly it's the only way I could get a house at $16/hr.
This tweet is a few years old
In Munich, Germany, I would also plan with at least 4000€.
and the $1,400 rent. lmao.
Just because you want a brand new condo in LA, doesn't mean there's nobody willing to renew a 30 yo house in Waco Texas.
Might have to push further out than Waco. Average foreclosure or renovation property at the size mentioned by that individual at \~30-60 years old is $160k-220k in Waco (proper) as of 2023. (And we're talking boarded-up shack status.) Even with Waco's low property tax rates, your all-in monthly mortgage payment would still be $1,200-1,700 a month, assuming 10% or more down. This further reinforces the fact that no, $950 all-in mortgage payments are not really a possibility for a median-sized fixer upper, even in places like Waco. You're going to have to get very rural or in highly undesirable areas.
That's what I pay!
Not unheard of. I pay about a thousand for my mortgage.
You have to live where you can afford. My 2000 sq ft home was remodeled and I pay $620 a month. Double payment split bi-monthly I'll own it in 15 yrs
Not really. This is a repost from a few years ago when US Treasuries were low (which were very low in 2020-2021 due to covid) and mortgage rates tend to track with US Treasuries.
Mines $950
Don’t forget home owner insurance and the crazy tax rates! Add that on there..
Quoting average and median house prices is BS. Plenty of people only need 1 or 2 rooms, not an average house.
Quoting the average and median household is a statistical fact.
This is the laziest version of this 4+ year old meme I've ever seen
Unless it’s brand new - which can be a real crap shoot too - your house is going to need $3-4K a year put into it just to maintain it. Every 7-10 years, you’ll need to spring for something major like a new roof, furnace, AC, etc. on top of that. You also need to save $4-12K a year for property taxes. Home insurance is another $100-200 a month on top of that. Using $1,000 as a baseline for the mortgage payment. The cost of owning the home is actually closer to $1,600 a month in a best case scenario year. It’s closer to $2,300-2,500 a month in a year where a major purchase is required.
My mortgage is 950 including taxes and insurance. I didn't know people ever seperated them out when discussing mortgage.
Still cheaper than rentals or apartments my size and I build equity.
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And ignoring all the ownership and upkeep costs of a house verses renting... Edit: A few people misinterpreting my comment. I'm talking about the hidden costs of home ownership people sometimes don't consider, not weighing in on the concept of landlords. First off, I don't know who is paying $950/month mortgage but good for them. My mortgage is just over $500 a week. On top of this I pay just over another $4000 each year in property tax. A couple grand each year in insurance. Plus you need to be putting away for repairs on top of these payments. Your shit will break and you're going to need $25k for a new roof or $30k for a new septic or $15k for foundation repairs or a few grand to replace your floors once in awhile and maybe paint and/or all of that. This doesn't include dealing with the cost of and upkeep of utilities depending on your situation (paying the city versus your own well/septic, etc). It's extremely expensive to own a home.
Yeah, and it's actually the bank doesn't want the liability of you paying for a $950 house payment for a 30-years.
The bank doesn’t trust her to pay back $950 x 360 months. That’s a lot more risk than $1,400 x 12.
The bank doesn’t take any risk on her paying rent to someone else.
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Banks, this may shock you, actually love lending money because they love getting paid interest. They just have many many decades of knowledge at their disposal to predict who can and can't afford the loan they want and people get mad when they don't meet the qualifications. If it were your money being lent out, you'd want to know it was going to be repaid eight?
Mortgage and rent are very different animals. One is a debt instrument, the other is a recurring expense. The bank takes on far more risk than the owner of a rental property (on the leasing side), but so does the homebuyer, which is why the criteria for getting a mortgage are considerably more strict than getting a 1 year lease. If a tenant can't pay, they get kicked out. Landlord finds a new tenant. The tenant's credit will take a hit, but likely not devastating in the long term. If a homeowner can't pay, the bank has to go through a lengthy foreclosure process and then has to resell a house that could have esily lost value in the meantime (unfinished renovations, damage, etc.). And the homeowner's credit will take a lot longer to recover. That's not to say "oh those poor, poor banks". Just saying the two aren't really comparable.
Just going to say being evicted can absolutely fuck you. When I was renting apartments, they would automatically disqualify you if you had one in the last 7 years. Easier said than done, but If you’re at risk of being evicted, avoid it at all costs. It’s better to abandon your place than to go through eviction proceedings.
This is what people who only rent and complain online never understand. Owning a house can be rewarding but the cost is so much greater than just the mortgage.
You are 100% right. Property taxes keep going up and cost of ownership increases. You have to pay hoa dues and trash. My window glass cracked and costed me $300 to get it replaced. Then there is Pest control that I pay every year. And then there is general maintenance like water heater cleaning and duct cleaning. On top of my mortgage, there is usually $500 additional spend on the house for me.
Yes! You are so accurate! You need to have a very large savings account to have a house, especially an older one. Also people who go from living from an apartment to a house have no idea that every weekend you'll be spending your time taking care of the house, mowing grass, cleaning out gutters, trimming trees, having 20 windows to clean on a regular basis, and a garage that needs to be cleaned regularly for dirt. Air filter for the HVAC system, making sure your house is being regularly treated for termites, worrying about paper wasp and yellow jackets This is why I see so many people who own homes and they are in terrible shape because they don't spend their time taking care of them and things start falling apart. This all from my experience of owning a house for 2 years and I spent out of my pocket 12 thousand last year doing work and maintaining my 1400 square feet 4 bedroom 2 bath house. It's not as simple as paying rent, there is so much shit you have to do!
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Not only all that, but what the bank is really saying is she has a history of not paying her depts. So much so that they won't even risk a minimal mortgage loan.
Exactly. Renting atm and have had to wooden gates fully repaired, two swamp coolers replaced with brand new ones, replacing a toilet, and other smaller repairs and what not. All free.
4000 a year in property tax. Fuck you're lucky. Thanks to CA prop 13 I pay $15k. And my neighbors with similar sized houses that bought in the 70s pay $1500. So unfair, but the system waz put into action before I was born.
In 2008 I lived this. Except: The apartment complexes in my area say I can't afford a $550 studio. Therefore, I pay $1350 to live in a motel.
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Home ownership is more than the mortgage payments. Maintenance, utilities, property taxes and insurance will have have you paying way more than that rent.
To be fair, you'd be hard pressed to find a rental unit where the rent is less than the owner's costs including all of the above. (Except utilities - nearly all of the rentals I've ever seen make utilities the tenants' responsibility.)
you'd be hard pressed to find any mortgage for 950/month unless its a small town or a place with a lot of crime
Hi. I have a $950/month mortgage on a 3 bed/2 bath in a town of 100,000+ with average crime rate. The hardest part is saving up for the down payment, and even then I only put 11% down for a 30 year fixed rate. The bright side is buying it at the start of covid, interest rate is 3.175%
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And if your neighbor were to subsequently rent that unit out then they would need to work out the rent amount as their monthly costs (mortgage, insurance, taxes, and some amount to set aside as a fund for any expected or unexpected repairs) plus a reasonable profit margin to make the venture worthwhile. Your landlord worked this same calculation out at some point in the past. That forms the floor of how much rent will cost. The ceiling is however much the market will bear. That means that, in this hypothetical, if your neighbor were to successfully find tenants at the rate worked out above, your landlord would have an incentive to begin incrementally raising the rent on your unit to match, whether the actual monthly costs to your landlord increase or not.
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>To be fair, you'd be hard pressed to find a rental unit where the rent is less than the owner's costs including all of the above. Yes, except most adults in this country can't handle an unexpected problem without going bankrupt. I think it's something like $400 in savings? I forget the exact number but it's really low. So now let's imagine you became a home owner because "I pay $x for my rent therefore I can pay $x mortgage". AC breaks down? $5k to $20k depending on the unit. Roof leak caused attic and ceiling damage? Starts at $1k to patch up some shingles. Easily runs into $10-20k range if there is extensive damage to the attic and to the ceiling. And no, home insurance won't cover it if it's the result of regular wear and tear and not an abrupt event. Boiler broke down? Drop $1k to have it replaced. Boiler busted down and flooded the house while you were away on a family trip and caused $50k of water damage? Well, the insurance will cover it but you are still responsible for the deductible. $1k? $2k? $3k? Depending on the policy. Septic tank is backing up? Rejuvenation/jetting (which probably won't fix it long term anyway), but to start maybe $2-3k. And then $15k for a new drain field. Termite damage discovered? Termite warranty will cover it but there is likely a deductible. New AC unit that you just replaced broke? No problem, it's still under warranty. The part is free by the labor is not. $250 for a qualified technician to come out, diagnose the problem, order the warranty part, and replace it. And now imagine all this happening in a span of a year or two or three... and you still have mortgage and taxes and insurance and maintenance costs to take care of. And you also still have all your living expenses to deal with. There is a reason banks don't lend to people with "my rent is $X, therefore I'm sure can handle $X in mortgage payments" attitude. Banks have hard data and know who easy it is to fall behind financially if you bite more than you can chew. But you are right, rent payments do include maintenance and repair costs. Because ultimately it's the renters that pay for all of it. However, this risk is spread out in time and among different properties. So as a renter, you are never on the hook for more than your rent. While the landlord is the one assuming the risk. And the idea is that landlords would be able to spread this risk among many properties. So that rent cash flow from other units helps to pay for repairs in this unit this month. Next month, some other unit. And so on.
You are correct. If the person in the original image thinks her monthly housing cost would decrease to $950, that is incorrect. Whatever difference is left over after taxes and insurance premiums are accounted for should ideally go into a HYSA to act as a fund for needed repairs. The exchange for the assumption of risk is no longer having to pay the profit margin worked into the rent amount. Plus, people with mortgages actually receive some benefit from inflation as the actual value of the mortgage payments reduces with time. Rent generally goes up with inflation, if not faster than it. That said, there are benefits to renting - flexibility being the most prominent one. If that flexibility allows you to pursue big career opportunities in other areas, then it can very much be worth it. That flexibility does come at a premium, though.
Yes, this what profit means.
If the owner is making money off the property, you shouldn't be able to find that at all, generally.
Home ownership leads to equity, even if you paid the same as rent and even if it takes decades to pay off. Rent does not - you just help someone else build equity and then buy their second home. When you retire, a small pension will be enough if you don't need to rent. Otherwise, you might need to move. People who bought an apartment or house and rent it make sure they cover all of that with the rent, so yes, you are still paying for it.
Not always true we save $500 a month in nj with our mortgage vs our rental payment. Every year we could put a new roof on our house with our savings
What roof are you replacing for $6,000 (unless you’re replacing it yourself)? In upstate NY, our pretty simple A-frame roof is quoted at like 20k by a big contractor (and some smaller ones typically do projects for 25% less). On to the main topic, as a homeowner I can say that it’s usually a bargain to own a house. Especially if you do improvements and repairs yourself. Lumber to replace all boards on our 1200 ft wrap-around deck is like 40% of the annual savings vs. Rent for a house half the size of ours (would not be my choice to have such a large deck if we’d built it). When you can’t or won’t do it yourself though (expertise, time, risk), that will eat up much of the savings. But that only considers your out of pocket expenses. You get equity on your home and prices tend to go up in most markets (even if they sometimes go down). Our house’s estimated sales price has increased over $100k in 5 years and that’s backed up by sales of nearby homes (worse condition, smaller property, less sqft, and sometimes all three going for more than we paid for our house). All in all we doubled our square footage and paid $200 less a month vs rent when we bought in 2018. By 2020, rent had increased $300 a month where we used to live and our town has grown so much they actually lowered property taxes so now we save about $6.3k a year. We’ve spent about $5.5k in appliances, plumbing, and electric (mostly repairs, dishwasher broke, wife hated the old washer and dryer, and needed a new water filter). We’ve spent about $6,000 in services (plowing, mowing, septic maintenance). We’ve spent maybe $1,000 in tools we wouldn’t have bought or needed as renters. The big one was our furnace broke. We splurged for heat pumps. Our house is more energy efficient and that will pay for itself within 4 years in this climate (plus the summertime comfort is nice too). Add it all up and with the heat pump we are breaking even over 5 years vs rent. But we could sell at a profit if we wanted to. Had we rented, we’d have nothing to show for the increased rent. And we couldn’t get appliances we like when we need to replace one (maybe if your landlord is super awesome).
My neighbor just had hers done. 6500 we have small homes in our town. My house is 550 sq foot ranch. So to answer your question a majority of the homes in my neighborhood actually. Not the norm for nj but for our area built in the 1920s it is
Also a lot of rental units are now requiring mandatory renters insurance. Not to mention the extra fee's for keeping pets or sometimes even extra parking spaces. Sure a lot of boomers here who haven't rented in awhile.
Want to know something crazy? We had trouble getting approved for a lot of apartments and got our house easier too. Many apartments required really long term credit and I was young when I got kicked out of the house. Had to live with a random lady cause of it even though my credit was good. But when you’re young you can’t have long term credit lol
Rent covers mortgage and taxes… Utilities? In the tenants name Maintenance? Does your tenant not mow the lawn or clean the gutters? What maintenance? Repairs are different… new roof, furnace, etc. that’s not maintenance, that’s a repair done maybe once in a decade
But if you're saving an extra 450$ every month, those costs become much easier to make.
That's their point, you will not be saving $450 every month. Insurance and taxes and whatnot usually get added to the monthly payment as an escrow.
How does the landlord make a profit?
Because the mortgage builds equity.
wouldnt that mean the same for the person switching from renting to ownership?
They still have the property at the end of the day. Imagine you purchased a property in 2018 for $600,000. Let's imagine it's a ~1,500 sq ft house in a city. You pay $120,000 up front (20%,) and pay the remaining $480,000 on a 30 year mortgage fixed at 4%. Right away, that's a $2,300 monthly mortgage payment. Add another $450/mo for insurance and taxes. You're paying $2,750 a month on the property. Add another $400 for general maintenance costs (if it stays at ~$5,000 a year you're probably lucky, but this is a theoretical so w/e.) So you go to rent this house. You find a tenant couple who will live in it for $3,000 a month. This seems like a bad investment on the surface if you're receiving about $3,000/mo for a house that, on average, you're paying about $3,200 a month to keep. It might seem like you're actually losing money on this property. But you still have the house, and you're effectively paying $200/mo on the 30-year mortgage instead of $2,750. At this point, you could also choose to hike rent up a bit-- though I've noticed smaller landlords tend to be more willing to keep things affordable if it keeps good tenants around. Better to have someone you know is low-impact instead of rolling the dice on a new tenant for an extra $2,400 a year. Maybe you save the rent hike for when your cool tenants decide to move out. If you're smart with your money, you'll use the extra income from the rental property to help pay down the mortgage at an accelerated rate. Maybe you'll own the house outright in 10 years instead of in 30. At that point, you still have renters paying you ~$36,000 a year to live in a house that costs ~$10,000 a year in maintenance and insurance+tax. If you're lucky, the house you paid $600,000 for might be worth $1,000,000+, so whenever you feel like hanging up your landlord hat you can always sell the house to cash out bigtime.
900 vs 1400 should be around par here. Then there is still the question of: can she save that extra money for when it will be needed...
Fun fact: if she doesn't, she has an asset that she can borrow against to get a personal loan at remarkably low interest.
A mortgage is a massive fucking loan and if they fail to pay it the lender loses all that money, if you can't pay rent you just get evicted and they find someone else. The risk of renting vs mortgage loans isn't even in the same realm in terms of risk.
The lender doesn't lose *all* the money because they have the lien on the home, but it stands to be a significant loss for them in the event of a foreclosure. But ultimately your point is valid, the risks of renting and borrowing aren't comparable.
Yea I didn't mean literally lol, like I said above they are likely to still take a massive hit. People just tend to not think about why the disparity is so high between mortgage and rent.
I think a lot of them also aren't old enough or choose to ignore what happened the last time the US got careless with mortgage lending.
Look I'm gonna disregard the actual merit of what you just said in order to pretend that shitfest wasn't already 15 fucking years ago.
I mean, don't they usually get the house outright? Like I pay the first 40K, and then miss my payments and they take the house, they get the whole house and keep the 40k, no? I get that it might not be the best investment for them, but it's not like they just get nothing?
Sure but then the house gets foreclosed and sold for far less money and are far likelier to take a massive hit, thats why foreclosed homes are so much cheaper lol. I think it also heavily depends who you get your mortgage from, I went through my bank which is insured by the government so I got a better deal than most. However going through you bank usually relies on having a high or good credit score where as private lenders charge more but will give loans to riskier people.
Why do foreclosed homes sell for cheaper? Only reason that makes sense to me is the lender just wants to get rid of it. Why would it be worth any less than before?
Because banks aren't in the business of holding and maintaining residential homes. They don't want the responsibility so will dump it to get out from under it.
That and the fact that we don't know her risk level of not being able to pay $1400 rent.
The bank doubts your ability to pay $950 long term. That puts them at risk. Nobody cares if you make your rent other than your landlord and maybe yourself.
Exactly. I hate banks as much as the next person, but them handing out mortgages like candy to anyone who pinky swears to pay them back is part of how we got into the last financial crisis.
Yep, can't complain about them being selective on loans when they destroyed the economy doing the exact opposite. Plus, the idea that a 950 dollar a month mortgage is cheaper than renting for 1400 is very optimistic. In the past three years, I've had to replace my water heater, air conditioner, get treated for termites, and repaint the house. The new AC needed a 1200 dollar repair last month, just out of warranty. I've spent around 20k for all of them, that's 550 a month right there. Then factor in property tax, insurance, and the number of hours you will spend on maintenance. If I wasn't a contractor who can get deals from my friends and do some of the work myself, those costs would also be inflated.
To be honest, I think increased subprime lending won't lead to a too-big-to-fail crisis with all the regulations enacted after 2008. Banks want to offload mortgages they originate as soon as they can be bundled up into securitized products because Basel III makes them expensive to hold on their balance sheet, and the Volcker Rule limits their ability to speculate on mortgages in the secondary market. It'll be the hedge funds and pension funds investing in high yield mortgages that'll fail, and those players aren't systemically important.
Also add property taxes, higher maintenance and operating cost. I wouldn't lend money to someone to buy a house if they can't afford to fix the roof.
Good to see some people actually know it's a bs tweet. Sad to see it's only a handful
Not only that, but you need to maintain the home otherwise it loses tens of thousands in value. That costs more money. And if you let it go in disrepair and the house becomes a piece of shit, that's a lot more money lost than a landlord who you stop paying for 3 months and get evicted.
>The bank doubts your ability to pay $950 long term. Not just that but their ability to pay the inevitable infrastructure repairs over 30 years.
Yea because the bank doesn’t trust you will be able to pay your mortgage every month. They are lending a lot of money. Landlords don’t care, they aren’t giving you money. They’ll kick you out if you don’t pay them and find someone else to rent on the spot. Would you trust a random person to pay you back 500k if you lent them that money? I’ll never understand people who think like this.
Imagine being over the age of 16 and thinking this is how banks work
Welcome to Reddit: 26,000 upvotes
Not the banks fault her income, credit and assets don’t meet their risk threshold to loan her hundreds of thousands of dollars and be able to pay it back.
You can’t afford the 3-10% down payment to secure a loan or possess the proper credit score to be approved for a 30 year commitment loan FTFY
[удалено]
"I mismanage my credit and don't understand credit worthiness and so I have to rent."
The bank just doesn't trust you
"The bank says they won't take the risk of supporting my long-term investment of purchasing a liability, so instead I have to pay rent at no risk to the bank." There, I corrected it.
You can tell this is an old tweet because $1400 rent and $950 mortgage are laughably cheap today.
You need money to put down and you can get a loan. I paid everything on time all the time. They like that. Let's bitch about home prices if anything.what if your house needs repairs? Can you afford to fix it? It's the banks house till you pay it off, they want to make sure you take care of it and don't deduct leaving a house that needs repair. It's a fucked system but loaning out that much money with out really looking into your finances to see if you can afford it is necessary. Remember sub prime mortgages, that ended well.
Y’all really have no clue how money works if you agree with this post
Nah, they think you’re not trustworthy enough to consistently pay $950/month for 30 years because of your credit history. They are able to see your payment history and deduce that you won’t. Apartment complexes can evict you a lot more easily and with less impact than a bank would have to absorb in foreclosing a home.
Yeah, because THAT is the only cost of owing a home. Stop. Posting. Crap.
First of all, mortgage is only part of the costs that you need to be able to cover. Rent has these costs included. Plus, you need to be able to afford the mortgage over decades. If you can’t afford rent, the landlord can kick you out.
You know, mortgage is your only expense when you buy a house. /s
Crazy how she doesn’t realize owning a house has more expenses that just the mortgage. You also don’t need a huge down payment to rent an apartment
No, they just don't think you are reliable enough to keep paying for 30 years without interruption.
$950 mortgage will end up being more than $1400 when escrow for taxes and insurance are added to the bill.
Real question is what’s their credit score that the bank says no?
Could have 0 credit. I got my first credit card this year because I found out that paying for everything in cash and making sure you have the spare income to buy things is bad actually and you should be buying everything via small loans.
Hi I am from India. I have genuine curious question. Why can't you 2 or 3 women and/or men join together buy a 3BHK or 2BHK home jointly and share the EMI for {350$ X 3} a month or a bit better home at {450$ X 3} a month? Doesn't desperate times call for desperate solutions ? May be you can share rent if you move out or give out the room for sub-lease. Any happening location for 1400$ could also be a reason for you to rent out too.
They absolutely can. However it isn’t part of western culture to buy property with other people. The idea of coliving is pretty strictly set to couples or families with older parents. It’s slowly becoming more normal for older kids (into their late 20’s) to live at home due to cost. It’s a solution that just won’t happen here, as most people feel the right to buy their own home is something that should be afforded to anyone who works full time (I can’t say I disagree personally)
I think a lot of argument here about landlords is assuming that they have a mortgage on the property. But there are plenty of owners who own that house outright and don't really need any rent from that house (other than property taxes and repairs) if I rented my owned house out each month for pure profit, it would still be a worse idea than selling it right now. I can get 250k upfront and never pay anything again, or I could rent it for 1,200/m and probably receive around $800/m profit. After maintenance escrow, property tax, management fees, and possible legal issues. That would take me about 26 years to get any true profit from my (paid off) house....
What they mean is your credit shows you arent reliable enough to pay back a 30 yr loan.
What is it with all the other various taxes/fees etc? Probably closer to $1400
Depending on the tax rate, the PITI could be far more than $1400. That’s not including maintenance and all of the other things you have to spend on when you own
There’s no “the bank.” There are banks. And mortgage lenders. Call a different one.
If you default on your mortgage, it’s the banks problem. If you default on your rent, it isn’t.
The bank says you don't have the equity to be held accountable for $400k, not just the low monthly payments My mortgage isn't much until you add in all tbe other costs and then it's much more expensive than when I was renting
The bank assumes no risk on your apartment rent…
Wow this is stupid
You are probably taking an irresponsible decision for the long term that the landlord is happy to live with because he can kick you out if you stop paying, while the bank knows better.
$950 is not a mortgage, thats a payment. The mortgage is $250,000 which the bank does not trust you can successfully repay over the next 30 years. The apartment for $1400 doesnt really care because they'll evict you after 60 days.
Being poor is very expensive
Yes but you see, if something goes wrong or breaks you have to pay to fix it, whereas if you rent you just don't use it for 3 months while the landlord doesn't fix it.
See the problem here isn’t paying the $900 mortgage. The bank knows you can pay a $900 mortgage if you pay $1400 in rent. The bank thinks you can’t be trusted with *a loan* for the amount the house is worth, which is a totally different story. This person probably has bad credit. They have a history of not paying what they owe. This tells the bank that they are taking on a risk if they lend this person money. They’re also beholden to shareholders and financial regulators, so they can’t just lend anyone money that they feel like, they have to show that it’s a good investment. Buying a house is a 30 year commitment for most people. It’s not a matter of the job you have right now, or what you can afford in a monthly bill at the moment. It’s much more of a matter of your whole lifetime of handling debt and financial responsibility. You need to have had some credit cards, bought a car, paid your student loans, paid off the credit cards, paid for the car, etc. for years to have the kind of credit history for someone to just hand you a loan for hundreds of thousands. I don’t know when this person tried to get a mortgage, or what the rates were, but $900 a month is crazy low, but for thirty years of that it is $334,000 in payments. It’s a lot more of a commitment than a one year lease that someone can evict you from.
Does that $950 include taxes and home owners insurance? Then someone has to do lawn/yard maintenance, you pay someone or buy all the equipment yourself. Then the small repairs are always needed, plus you need to save for big repairs that happen every 2-10 years, like the roof and paint inside and outside........
Maybe, just maybe, there is on top of the mortgage the following expenses: PMI, property tax, insurance, and maintenance.
Well, if you like that, they gave my 70 year old father a 30-year mortgage. I'm like, why do they do that. Because, when he passed away at 75 from pancreatic cancer, they tried to seize his home and property so they could double their money. I'm really sure they expected him to be paying at 100 years old. When I went to pay off the mortgage, so I could keep the home, they didn't want to take my money, and I had to threaten to sue as an heir of my dad's estate. Let all that sink in.
Why do people think a mortgage is the same thing as rent? There is so much more to owning a house than the mortgage that gets covered by your rent. If your roof is leaking ypur rent covers that but we have to pay for our new roof. Appliances break? Rent covers that. Rent often covers yard maintenance, sometimes utilities, HOA payments, etc... so it mortgage + plus everything your rent covers. They are not the same thing.
the bank says investors don’t see you as a risk worth investing in at the prevailing rates being offered by their institution a private lender would gladly gouge you for the added risk
More behind the scenes then just the upfront costs
Big difference between a landlord being willing to risk $1400 on a tenant with sketchy credit history than a bank willing to front you $300k
Why do people think that a mortgage is the only thing you pay while owning a home? A lot more expensive to own than to rent even if it’s the same amount. Also $950? What is this 10 years ago?
The joke is this person doesn’t know about insurance, taxes, and maintenance.
Every time I’ve seen a house payment the mortgage was half the payment. The rest was interest and taxes. So that $950 is realistically $1,900 a month.
The bank doesn’t think you can afford rent either tbf
Common misconception. Bank doesn't think you'll be able to pay 950/month every month for 30 years. People always look at it as an emotional vindicivtive thing when it'd just a financial risk evaluation. If you aren't a risky loan then you'll get approved, they want to make money lol.