Comments on: Rent vs Mortgage: Calculating Tangible and Intangible Costs http://frugaldad.com/2009/08/18/rent-vs-mortgage-costs/ Tips for living frugal while still having a life Tue, 16 Mar 2010 09:02:29 -0500 http://wordpress.org/?v=2.8.5 hourly 1 By: Tamara http://frugaldad.com/2009/08/18/rent-vs-mortgage-costs/comment-page-1/#comment-36225 Tamara Sat, 09 Jan 2010 20:39:53 +0000 http://frugaldad.com/?p=3448#comment-36225 Of course there are variables, but franklinunited lays it all out if you are buying with a typical 30 year mortgage. The reality is that you won't actually start really paying for most of the house itself for a long long time. If you bought for $275,000 and sold 5 years later for 350,000, people count that as a $75,000 profit, and it absolutely is not!!! You barely scratched the surface of that $275,000 and you spent money on repairs. Do the math, look at the actual cost of the house after the interest is added in, then see what kind of "profit" you've made. Better to rent unless you can pay cash for the majority of the house. Of course there are variables, but franklinunited lays it all out if you are buying with a typical 30 year mortgage. The reality is that you won’t actually start really paying for most of the house itself for a long long time. If you bought for $275,000 and sold 5 years later for 350,000, people count that as a $75,000 profit, and it absolutely is not!!! You barely scratched the surface of that $275,000 and you spent money on repairs. Do the math, look at the actual cost of the house after the interest is added in, then see what kind of “profit” you’ve made. Better to rent unless you can pay cash for the majority of the house.

]]> By: Dvdad http://frugaldad.com/2009/08/18/rent-vs-mortgage-costs/comment-page-1/#comment-32628 Dvdad Sat, 10 Oct 2009 06:33:07 +0000 http://frugaldad.com/?p=3448#comment-32628 Owning is, in most cases far better than renting. Bought my first house in 2000 sold it 5 years later for a 50k dollar profit. Bought current house which appreciated about 30 per cent, dropped back 5 or 10, still worth 20 percent more than what I paid. I've made extra mortgage payments so equity is growing. Each month the mortgage shrinks and my net worth grows. When I retire I will own the house with no mortgage or rent. Maintenance is not that big of a deal . I do much of it myself. Appreciation has out paced these expenses by far. For me homeownership has been one of the smartest financial decisions I've ever made Just make sure you don't buy more house than you can afford, buy at a good price, in a good neighborhood, and stay put. Owning is, in most cases far better than renting. Bought my first house in 2000 sold it 5 years later for a 50k dollar profit. Bought current house which appreciated about 30 per cent, dropped back 5 or 10, still worth 20 percent more than what I paid. I’ve made extra mortgage payments so equity is growing. Each month the mortgage shrinks and my net worth grows. When I retire I will own the house with no mortgage or rent. Maintenance is not that big of a deal . I do much of it myself. Appreciation has out paced these expenses by far.
For me homeownership has been one of the smartest financial decisions I’ve ever made

Just make sure you don’t buy more house than you can afford, buy at a good price, in a good neighborhood, and stay put.

]]> By: marci http://frugaldad.com/2009/08/18/rent-vs-mortgage-costs/comment-page-1/#comment-31706 marci Tue, 15 Sep 2009 03:20:58 +0000 http://frugaldad.com/?p=3448#comment-31706 ps - square footage is main floor. Also has a full length of house standup/walk thru attic with windows at ends with permanent real stairs to it. ps – square footage is main floor. Also has a full length of house standup/walk thru attic with windows at ends with permanent real stairs to it.

]]> By: marci http://frugaldad.com/2009/08/18/rent-vs-mortgage-costs/comment-page-1/#comment-31705 marci Tue, 15 Sep 2009 03:18:52 +0000 http://frugaldad.com/?p=3448#comment-31705 @Jenn - $65/month property taxes - NW Coastal rural Oregon. My property taxes are $760/yr on a median home in my rural town area. Mine is newly added on to, remodeled, new roof, electric, flooring, windows, plumbing, fixtures, etc... basically new. 1035 sq ft with 2/1.5. New woodstove, Sliding glass doors onto a covered 8x30 patio, outbuilding, on a large corner city lot. City water and sewer and sidewalks. Large garden plot and lots of edible landscaping. @Jenn – $65/month property taxes – NW Coastal rural Oregon. My property taxes are $760/yr on a median home in my rural town area. Mine is newly added on to, remodeled, new roof, electric, flooring, windows, plumbing, fixtures, etc… basically new.
1035 sq ft with 2/1.5. New woodstove, Sliding glass doors onto a covered 8×30 patio, outbuilding, on a large corner city lot. City water and sewer and sidewalks. Large garden plot and lots of edible landscaping.

]]> By: Jenn http://frugaldad.com/2009/08/18/rent-vs-mortgage-costs/comment-page-1/#comment-31629 Jenn Mon, 14 Sep 2009 04:14:28 +0000 http://frugaldad.com/?p=3448#comment-31629 Just had another thought after the post above. My mom who is about to make yet another move (to her ~30th purchased home) said something I find funny. When she was selling her house but hadn't found the new one yet, I asked her if she was starting to think of downsizing to an apartment. Her current home is a condominium bungalow in a golfcourse community and I knew getting rid of the condo fee was one thing this move was suppose to address. Turns out she decided it was far more cost effective to hire her own lawn maintenance company and snow removal service than pay the $400/month condo fee. Yes they maintain the outside of the house but there was always a delay and multiple calls to get things done, and on an all brick home with vinyl clad windows, there really isn't a lot of upkeep outside. The condo corp. also banned street parking and garage sales, both deemed unsightly to the neighbourhood. When she wanted to enlarge the standard patio area she could only choose from 3 preapproved larger configurations and she had to hire one of their preapproved contractors. After years of non-condo single homes she decided condo living wasn't for her, she wants what she wants when she wants it. Given her newly discovered aversion to condos I suspected she wouldn't be moving to a condo apartment, but perhaps a rental would do it? Her reply, "Oh, I'm still too young for a rental". Translation, that's only for the really elderly and I'm not quite 70. At this point in her life she moves from house to house mortgage free, just transfering her funds from the sale of one to the purchase of the next similarly priced home. So other than legal and moving fees, the moves are "free". Rent is money wasted in her mind and growing up in that environment I guess that's why renting never really crossed my mind. Before she moves in to the new place she'll have a week of overlap before she has to be out of the old one. In that time she's having the roof redone, the entire interior painted, the kitchen cabinets replaced, and installing new carpets, hardwood and custom wood blinds. Within a week it will look like "her" and look like she's been there for years. Until next year when she'll finds the next slightly more perfect place, around the corner or across the street (yes she's done that) and she'll be off again, pocketing another profit. I have to give her credit, she always buys well, does just enough of the right improvements and sells at the perfect time in the housing market. Given how well she's done over the years (and how much fun she still has doing it) maybe purchasing is the only way to go for some people. I don't think any amount of calculations comparing owning vs renting would convince her that renting makes sense. I belive she'll only give up ownership when she needs to start using the cash for "rent" in a seniors/retirement home. So until her health dictates it, she'll carry on as she always has. Just had another thought after the post above. My mom who is about to make yet another move (to her ~30th purchased home) said something I find funny. When she was selling her house but hadn’t found the new one yet, I asked her if she was starting to think of downsizing to an apartment. Her current home is a condominium bungalow in a golfcourse community and I knew getting rid of the condo fee was one thing this move was suppose to address. Turns out she decided it was far more cost effective to hire her own lawn maintenance company and snow removal service than pay the $400/month condo fee. Yes they maintain the outside of the house but there was always a delay and multiple calls to get things done, and on an all brick home with vinyl clad windows, there really isn’t a lot of upkeep outside. The condo corp. also banned street parking and garage sales, both deemed unsightly to the neighbourhood. When she wanted to enlarge the standard patio area she could only choose from 3 preapproved larger configurations and she had to hire one of their preapproved contractors. After years of non-condo single homes she decided condo living wasn’t for her, she wants what she wants when she wants it. Given her newly discovered aversion to condos I suspected she wouldn’t be moving to a condo apartment, but perhaps a rental would do it? Her reply, “Oh, I’m still too young for a rental”. Translation, that’s only for the really elderly and I’m not quite 70. At this point in her life she moves from house to house mortgage free, just transfering her funds from the sale of one to the purchase of the next similarly priced home. So other than legal and moving fees, the moves are “free”.

Rent is money wasted in her mind and growing up in that environment I guess that’s why renting never really crossed my mind. Before she moves in to the new place she’ll have a week of overlap before she has to be out of the old one. In that time she’s having the roof redone, the entire interior painted, the kitchen cabinets replaced, and installing new carpets, hardwood and custom wood blinds. Within a week it will look like “her” and look like she’s been there for years. Until next year when she’ll finds the next slightly more perfect place, around the corner or across the street (yes she’s done that) and she’ll be off again, pocketing another profit. I have to give her credit, she always buys well, does just enough of the right improvements and sells at the perfect time in the housing market. Given how well she’s done over the years (and how much fun she still has doing it) maybe purchasing is the only way to go for some people. I don’t think any amount of calculations comparing owning vs renting would convince her that renting makes sense. I belive she’ll only give up ownership when she needs to start using the cash for “rent” in a seniors/retirement home. So until her health dictates it, she’ll carry on as she always has.

]]> By: Jenn http://frugaldad.com/2009/08/18/rent-vs-mortgage-costs/comment-page-1/#comment-31613 Jenn Mon, 14 Sep 2009 02:16:20 +0000 http://frugaldad.com/?p=3448#comment-31613 The view from were I sit north of the Canada/US border is a bit different. No such thing as a tax credit for on your mortgage, which means for many folks paying it off asap is ideal. On the down side property taxes in my area seem high (don't know where you live to get $65/month property takes but mine are $6000/yr for a 3000sq/ft on 3 rural acres. A couple of years ago our little rural township was absorbed into the nearby city so now we pay higher taxes, but still have volunteer fire department, no city water or gas, no sidewalks, etc etc. As newlyweds we bought a small town house in the suburbs. I was still in university and then an entry level job so we struggled even with a tiny mortgage. We scrimped and saved, made a few improvements and 6 years later sold for 50% more than we paid. With the profit we bought our lot and started construction and for 2 years camped out in my parents unfinished basement while we built the house. By doing much of the work ourselves we saved a ton and got exactly the house we wanted. Fast forward to 15 years later. The house which was worth $250k when we finished it is now worth $500k and the mortgage is down into the $180s. We're rapidly knocking down the mortage by paying every two weeks(I can't believe there are still people paying monthly when you can save 8? yrs by paying more frequently). We rounded the normal payments up (should be ~$750 every two weeks but we requested they take $800). Whenever we get a tax refund, bonus, or just accumulate a little extra we throw it at the mortgage. On our current plan we hope to be done with the mortgage in about 7 years. At that point for 1-2yrs we'll use what was the mortgage money to do one last round of house improvements so nothing should need to be replaced during our retirement (roof, windows, deck, septic field, major appliances and furniture). We'll buy a new(er) car, and sell whatever 2 we're driving at that point as we'll only need 1 in retirement. Renting was never really a consideration for us - can't say we even did the math on it. When we met my husband was a few months into his first job out of college. When we married 18 months later we bought our first house 2 weeks after we got back from our honeymoon. He grew up in a small town and hated living in the city. I grew up in the suburbs and wanted the country life. There are some rural rentals, but not nearly the options available in town. On top of that I'm a bit of a decorating/design junkie and had definite ideas about the house. Living where I couldn't renovate or even paint would never feel like home. I designed the house, had the plans drawn up properly for the building permit and we took it from there. We both come from "handy" DIY families so building a complete house was just taking all those projects to there next logical conclusion. My DH's parents built their home with cash as they got it and have never had a mortgage. They still live there and are 80 now. My mom's been in real estate for 35yrs and we moved virtually every year of my life growing up. They made a profit on everyone, and she's still selling and moving and will be 70 in January. Her next move is in 3 weeks... So we come from opposite ends of the home ownership range: one house and never move vs. 19 homes before I married at 21. Renting was just never done in our family so it never really crossed my mind as an option. To this day the only renting done in either of our families has been by university students, newlyweds in the first year, and an elderly grandmother who rented an appartment in town when she wanted to free up her equity to travel, and the snow shovelling at her country place became too much. I guess I've been brainwashed a bit to look renting as a temporary arrangement for certain periods of your life, but not a long term situation. Funny how you accept one way of doing things as normal or right and don't give any other way a fair assessment. The one piece of the story I hadn't counted on is that while we always planned to be carried out of this house in pine boxes...I've now mentally moved on to where this house is looking more like a big pile of equity I'm not using for the things that are now important to me. My husband still wants to live here forever, and hopes I'm just going through a phase. I look at the $300k of equity and think we should soon downsize to something small and be mortgage free immediately. I think I've come to realize that designing, building and decorating the house was the fun part, and now that's done and staying here forever at any expense isn't so important to me. I'd rather free up the money to travel more or retire that much earlier. Our retirement is tied directly to when the mortgage is gone. For now we continue on the original plan - pay off the mortgage asap and stay here forever. Meanwhile I keep an eye on the real estate listings... The view from were I sit north of the Canada/US border is a bit different. No such thing as a tax credit for on your mortgage, which means for many folks paying it off asap is ideal. On the down side property taxes in my area seem high (don’t know where you live to get $65/month property takes but mine are $6000/yr for a 3000sq/ft on 3 rural acres. A couple of years ago our little rural township was absorbed into the nearby city so now we pay higher taxes, but still have volunteer fire department, no city water or gas, no sidewalks, etc etc. As newlyweds we bought a small town house in the suburbs. I was still in university and then an entry level job so we struggled even with a tiny mortgage. We scrimped and saved, made a few improvements and 6 years later sold for 50% more than we paid. With the profit we bought our lot and started construction and for 2 years camped out in my parents unfinished basement while we built the house. By doing much of the work ourselves we saved a ton and got exactly the house we wanted. Fast forward to 15 years later. The house which was worth $250k when we finished it is now worth $500k and the mortgage is down into the $180s. We’re rapidly knocking down the mortage by paying every two weeks(I can’t believe there are still people paying monthly when you can save 8? yrs by paying more frequently). We rounded the normal payments up (should be ~$750 every two weeks but we requested they take $800). Whenever we get a tax refund, bonus, or just accumulate a little extra we throw it at the mortgage. On our current plan we hope to be done with the mortgage in about 7 years. At that point for 1-2yrs we’ll use what was the mortgage money to do one last round of house improvements so nothing should need to be replaced during our retirement (roof, windows, deck, septic field, major appliances and furniture). We’ll buy a new(er) car, and sell whatever 2 we’re driving at that point as we’ll only need 1 in retirement.

Renting was never really a consideration for us – can’t say we even did the math on it. When we met my husband was a few months into his first job out of college. When we married 18 months later we bought our first house 2 weeks after we got back from our honeymoon. He grew up in a small town and hated living in the city. I grew up in the suburbs and wanted the country life. There are some rural rentals, but not nearly the options available in town. On top of that I’m a bit of a decorating/design junkie and had definite ideas about the house. Living where I couldn’t renovate or even paint would never feel like home. I designed the house, had the plans drawn up properly for the building permit and we took it from there. We both come from “handy” DIY families so building a complete house was just taking all those projects to there next logical conclusion. My DH’s parents built their home with cash as they got it and have never had a mortgage. They still live there and are 80 now. My mom’s been in real estate for 35yrs and we moved virtually every year of my life growing up. They made a profit on everyone, and she’s still selling and moving and will be 70 in January. Her next move is in 3 weeks… So we come from opposite ends of the home ownership range: one house and never move vs. 19 homes before I married at 21. Renting was just never done in our family so it never really crossed my mind as an option. To this day the only renting done in either of our families has been by university students, newlyweds in the first year, and an elderly grandmother who rented an appartment in town when she wanted to free up her equity to travel, and the snow shovelling at her country place became too much.

I guess I’ve been brainwashed a bit to look renting as a temporary arrangement for certain periods of your life, but not a long term situation. Funny how you accept one way of doing things as normal or right and don’t give any other way a fair assessment.

The one piece of the story I hadn’t counted on is that while we always planned to be carried out of this house in pine boxes…I’ve now mentally moved on to where this house is looking more like a big pile of equity I’m not using for the things that are now important to me. My husband still wants to live here forever, and hopes I’m just going through a phase. I look at the $300k of equity and think we should soon downsize to something small and be mortgage free immediately. I think I’ve come to realize that designing, building and decorating the house was the fun part, and now that’s done and staying here forever at any expense isn’t so important to me. I’d rather free up the money to travel more or retire that much earlier. Our retirement is tied directly to when the mortgage is gone.

For now we continue on the original plan – pay off the mortgage asap and stay here forever. Meanwhile I keep an eye on the real estate listings…

]]> By: marci http://frugaldad.com/2009/08/18/rent-vs-mortgage-costs/comment-page-1/#comment-31007 marci Tue, 01 Sep 2009 15:17:54 +0000 http://frugaldad.com/?p=3448#comment-31007 My paid-cash-for home is not considered an investment - but Peace Of Mind :) I have a roof over my head til I die - for under $90/month right now in insurance and property taxes... Sure that can rise, but not more than 3%/year - so no big jumps. I did all the updating - no big maintenance will have to be done during my lifetime, excepting catastrophies. NEVER again do I pay RENT - as long as I stay in this house. Peace of mind is good! Having no mortgage/rent is a vital part of my retirement plan and the only way I could retire! My paid-cash-for home is not considered an investment – but Peace Of Mind :)
I have a roof over my head til I die – for under $90/month right now in insurance and property taxes… Sure that can rise, but not more than 3%/year – so no big jumps. I did all the updating – no big maintenance will have to be done during my lifetime, excepting catastrophies.

NEVER again do I pay RENT – as long as I stay in this house. Peace of mind is good! Having no mortgage/rent is a vital part of my retirement plan and the only way I could retire!

]]> By: DDFD at DivorcedDadFrugalDad.com http://frugaldad.com/2009/08/18/rent-vs-mortgage-costs/comment-page-1/#comment-30996 DDFD at DivorcedDadFrugalDad.com Tue, 01 Sep 2009 12:10:58 +0000 http://frugaldad.com/?p=3448#comment-30996 The math of home ownership works best for longer time periods, if you are only gong to be "there" for a few years-- renting probaly makes more sense . . . Further, people need to stop equating home ownership as an investment . . . it doesn't ALWAYS work out in your favor . . . The math of home ownership works best for longer time periods, if you are only gong to be “there” for a few years– renting probaly makes more sense . . .

Further, people need to stop equating home ownership as an investment . . . it doesn’t ALWAYS work out in your favor . . .

]]> By: David http://frugaldad.com/2009/08/18/rent-vs-mortgage-costs/comment-page-1/#comment-30849 David Sat, 29 Aug 2009 22:32:35 +0000 http://frugaldad.com/?p=3448#comment-30849 It is better to buy a home than to pay rent. You could pay rent of $800 a month or buy the house for $1200 a month. After 20 years you will finish paying off your mortgage, but if you were renting then you would still have to continue paying rent for the rest of your life. It is better to buy a home than to pay rent. You could pay rent of $800 a month or buy the house for $1200 a month. After 20 years you will finish paying off your mortgage, but if you were renting then you would still have to continue paying rent for the rest of your life.

]]> By: Janette http://frugaldad.com/2009/08/18/rent-vs-mortgage-costs/comment-page-1/#comment-30453 Janette Tue, 25 Aug 2009 02:29:17 +0000 http://frugaldad.com/?p=3448#comment-30453 Yes, buying a home can be a money pit. It can also be a blessing, depending on the area. Personally, our house was bought with cash and I would not trade it for anything (even though our taxes are about the same as rent on a three bedroom in town)! Yes, buying a home can be a money pit. It can also be a blessing, depending on the area.

Personally, our house was bought with cash and I would not trade it for anything (even though our taxes are about the same as rent on a three bedroom in town)!

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