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I marvel when people state opinion as fact.
Most of these kinds of discussions must be nuanced. Blanket statements are not. Which is why many beliefs and opinions regarding finances, debt, budgeting, investing, "affordability" -- really boil down to how a person feels emotionally about such things.
A person CAN use debt to their financial advantage. AND paying rent for 20 years can leave a person quite well off.
In this case it's my opinion, but it's also true.
A person can "invest in their house" and end up with xxxx.00 amount of money after selling the home to get the equity out -- OR -- they could have put money aside instead of buying a house, and have just as much money (even calculating homeownership tax breaks) as the person who bought a house. AND the person who rented all those years had no repair/maintenance costs (which are NOT tax deductible), no ownership responsibility, could much more easily move if the job required it, etc.
As for the couple's student loan debt, that also could in certain circumstances be debatable about whether it's bad debt. One factor -- if not the main one is -- was that education, those degrees worth it in terms of earnings over a lifetime. There are two threads right now on the employment forum about whether getting a master's degree or higher -- especially after age 40 or 50 is "worth it."
It seems more people (not just here, but in general) are judgmental -- or so as not to use that word -- have stronger opinions -- about others having credit card debt vs student loan debt.
The couple we've been discussing is not necessarily in a bad place financially. We certainly can't say whether they are or are not, without seeing more of their financial picture.
Of course people CAN use debt to their advantage -- but how many people actually do? Not very many.
Let's use round numbers to keep it simple:
BUY: $125,000 house, 20 year mortgage (let's not go 30 - bad move) - $1,000 per month payment (all in including taxes): You have spent $240,000. You also have had to spend money on maintenance. Let's say $2,000 a year, so you are out $40,000 here. At the end of the 20 years you own a house that hopefully has appreciated modestly, maybe the house is worth $150,000. Less the cash you have spent on maintenance, you are $110,000 ahead.
RENT: 20 years at $1,000 per month: You have spent $240,000. You didn't have to spend the $40,000 on maintenance, so maybe you were smart and invested it wisely, but more likely, the money was spent on I Phones, cars, and other 'stuff' and you have nothing. And one other item: While you rented for 20 years, you gave up some control of your life, and put it into the hands of your landlord. You wanted to get a dog? Too bad, it's against the rules. You got a job offer 50 miles away and want to move? Tough - your lease has 6 months left. Don't forget the security deposit you give every one of your landlords - have fun getting that back. Don't forget moving expenses as you shuffle around from place to place. Don't forget storage expenses if you don't have enough room where you live.
Last edited by BeerGeek40; 10-02-2018 at 06:29 AM..
Of course people CAN use debt to their advantage -- but how many people actually do? Not very many.
Let's use round numbers to keep it simple:
BUY: $125,000 house, 20 year mortgage (let's not go 30 - bad move) - $1,000 per month payment (all in including taxes): You have spent $240,000. You also have had to spend money on maintenance. Let's say $2,000 a year, so you are out $40,000 here. At the end of the 20 years you own a house that hopefully has appreciated modestly, maybe the house is worth $150,000. Less the cash you have spent on maintenance, you are $110,000 ahead.
RENT: 20 years at $1,000 per month: You have spent $240,000. You didn't have to spend the $40,000 on maintenance, so maybe you were smart and invested it wisely, but more likely, the money was spent on I Phones, cars, and other 'stuff' and you have nothing. And one other item: While you rented for 20 years, you gave up some control of your life, and put it into the hands of your landlord. You wanted to get a dog? Too bad, it's against the rules. You got a job offer 50 miles away and want to move? Tough - your lease has 6 months left. Don't forget the security deposit you give every one of your landlords - have fun getting that back. Don't forget moving expenses as you shuffle around from place to place. Don't forget storage expenses if you don't have enough room where you live.
I’d rather be renting with the job scenario you posted instead of being an owner
760 thou is NOT "nearly a million". And I spotted that headline, last night, in my YouTube suggestions. I'm not about to click on a video from that creepy jackass.
The credit card debt and personal loans are bad. The mortgage is GOOD. The student loans CAN be good (positioned them to make a lot of money, it seems). The car loans are good, assuming they got decent rates. Their debt is not out of line, considering they're just starting out, and that it's roughly triple their income. The home is apparently a basic 'starter home', and the cars must be modestly-priced, too.
What if they lived in a 1mm house, deduct the 210K mortgage and suddenly they are debt free!
Clickbait nonsense starting with the title, they owe 760K not a million!
A mortgage of 210K anywhere is nothing lol this whole story is stupid for even including mortgages in there. I could afford a million dollar mortgage, doesn’t mean I’d have “crazy” debt lol.
Well, $210,000 will buy you a very decent home in the St. Louis area. Better than the DC area for sure.
It's not about what's less expensive, but rather peace of mind from not owing anyone anything.
I'd rather have the "peace of mind" knowing the landlord isn't going to jack up the rent next year or decide to sell and tell me to get out. I'd rather have the "peace of mind" driving a newer car that isn't likely to break down and is under warranty if it does.
You’re renting space. You aren’t using another person’s money.
It’s kind of silly to try to create a debate about this. A rent isn’t a debt or a liability. The end.
Doesn't change the fact that it took another person's money to build the space you are renting. And I said rent isn't technically a debt but it is an amount you are going to have to pay going forward if you want to have a place to live.
Apples and Oranges --- 20 years of paying rent leaves you with nothing. 20 years of paying a mortgage leaves you with an asset - that you can either keep living in, or rent out for income. Big difference.
Now that being said, $200,000 of mortgage debt is worse than $100,000 of mortgage debt. I'd take the lower amount always..... assuming you can find a $100,000 home in Washington DC that isn't in the middle of the ghetto. (I hope this word isn't politically incorrect these days).
I'm saying it is better to have the mortgage debt and end up with an asset than pay rent and end up with nothing. How can you summarily declare $100k mortgage better than $200k without considering the value of the asset you end with? I'll take the better real estate deal always.
A person can "invest in their house" and end up with xxxx.00 amount of money after selling the home to get the equity out -- OR -- they could have put money aside instead of buying a house, and have just as much money (even calculating homeownership tax breaks) as the person who bought a house. AND the person who rented all those years had no repair/maintenance costs (which are NOT tax deductible), no ownership responsibility, could much more easily move if the job required it, etc.
Most landlords don't set the monthly rent for less than the monthly expense, including all mortgages, taxes, and repairs. So generally when you rent, you are paying all those costs indirectly.
Almost all rent/own comparisons I've seen that show renting to be financially better involve renting a place considerably smaller and less desirable than buying a house. You can't compare a 4/2 2400sqft home with a 2br 1200sqft apartment.
BUY: $125,000 house, 20 year mortgage (let's not go 30 - bad move) - $1,000 per month payment (all in including taxes): You have spent $240,000. You also have had to spend money on maintenance. Let's say $2,000 a year, so you are out $40,000 here. At the end of the 20 years you own a house that hopefully has appreciated modestly, maybe the house is worth $150,000. Less the cash you have spent on maintenance, you are $110,000 ahead.
RENT: 20 years at $1,000 per month: You have spent $240,000. You didn't have to spend the $40,000 on maintenance, so maybe you were smart and invested it wisely, but more likely, the money was spent on I Phones, cars, and other 'stuff' and you have nothing. And one other item: While you rented for 20 years, you gave up some control of your life, and put it into the hands of your landlord. You wanted to get a dog? Too bad, it's against the rules. You got a job offer 50 miles away and want to move? Tough - your lease has 6 months left. Don't forget the security deposit you give every one of your landlords - have fun getting that back. Don't forget moving expenses as you shuffle around from place to place. Don't forget storage expenses if you don't have enough room where you live.
In your comparison, do you really think you are going to rent the home in case 1 for $1000 per month? If you were the owner of the first home, why would you rent for $1000 when your mortgage is $1000? Then you would be paying all that maintenance out of pocket and losing big money. No, you're going to rent it for $1500 so you can cover all the other expenses AND make some profit. People don't become landlords in order to lose money.
Student debt rules change to what? Student debt is 100% optional.
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