Paying off mortgage

[Sig]

even in this scenario you might be better off than renting where you are paying someone else’s mortgage plus their required return.

If you held on through to today you might just be breaking even, if you put nothing down. If you had to move any time between 2008 and today you would have taken a bath. Even if you rented it out then, rents had fallen significantly so they would probably not cover your interest plus some return on your invested equity, let alone maintenance and tax.

Interestingly another scenario where you may be better off renting is a high price market like the SF Bay area. In most of the moderately priced areas I've lived, rent for a house is around the same as what a 30 year mortgage payment would be on the same house. That makes it close to a wash in monthly cost to rent vs buy, and obviously when you buy you're building equity with your mortgage payments. But in SF, rent on the houses I lived is was only around 60% of what my payment would have been if I bought that same house, and this persisted over the 10 years I lived there on and off. In that case, assuming you can't count on appreciation, renting was definitely more advantageous financially. Plus it's damn scary paying $1.5M for a condo you know is only worth $100K almost anywhere else in the country!

 

[newwurldmn]

If you held on through to today you might just be breaking even, if you put nothing down. If you had to move any time between 2008 and today you would have taken a bath. Even if you rented it out then, rents had fallen significantly so they would probably not cover your interest plus some return on your invested equity, let alone maintenance and tax.

Interestingly another scenario where you may be better off renting is a high price market like the SF Bay area. In most of the moderately priced areas I've lived, rent for a house is around the same as what a 30 year mortgage payment would be on the same house. That makes it close to a wash in monthly cost to rent vs buy, and obviously when you buy you're building equity with your mortgage payments. But in SF, rent on the houses I lived is was only around 60% of what my payment would have been if I bought that same house, and this persisted over the 10 years I lived there on and off. In that case, assuming you can't count on appreciation, renting was definitely more advantageous financially. Plus it's damn scary paying $1.5M for a condo you know is only worth $100K almost anywhere else in the country!

my experience in NY was that renting was cheaper because people were willing to pay up for the opportunity of price appreciation and big landlords got operating efficiencies in maintainence. In the small city I live in now, renting is much more expensive in the lower income areas because people can’t afford the Down payments to buy (a form of the “poor” tax).

In my specific town, it’s about a wash but that’s only for the first few years as after that inflation causes rents to go up but your mortgage payments are fixed.

 

[Magic]

It's the same over here; lower income neighborhoods throw off a lot more cash over operating expenses. However the caveat is that people say they won't appreciate as much as the high income neighborhoods. This is probably true to an extent but I am skeptical that the market is propertly pricing long-term appreciation at the SFH level amidst all the noise. Like with currency carry; probably the naive yield seeker will come out ahead.

Regarding mortgages; the Fannie/Freddie government subsidy programs are a no brainer imo. Unless one has enough capital where it is not worth the time to bother; racking up the 10 available loans on investment real estate is probably some of the best risk adjusted returns out there; under ~$1mm and 4 units or less. Interest rate is low because the risk is subsidized and it's a really great benefit never to be marked to market.

As long as you can pay the mortgage you are free to go way underwater. These mortgages are a great way to get some short USD exposure, we are all usually already very long there; so they probably improve the mean:variance ratio of a person's global portfolio quite a bit over all possible future paths if we are denominating in buying power rather than USD.

 

[Snarkhund]

a fixed mortgage at historically low interest rates is a bet that inflation will come back. if you won't be overleveraged, I like it.

Exactly. If you refinance at 2% and the loan is assumable it has a value of its own in an inflationary market. The buyer has to qualify, of course.

I remember 15% mortgages.

 

[Sig]

It's the same over here; lower income neighborhoods throw off a lot more cash over operating expenses. However the caveat is that people say they won't appreciate as much as the high income neighborhoods. This is probably true to an extent but I am skeptical that the market is propertly pricing long-term appreciation at the SFH level amidst all the noise. Like with currency carry; probably the naive yield seeker will come out ahead.

Regarding mortgages; the Fannie/Freddie government subsidy programs are a no brainer imo. Unless one has enough capital where it is not worth the time to bother; racking up the 10 available loans on investment real estate is probably some of the best risk adjusted returns out there; under ~$1mm and 4 units or less. Interest rate is low because the risk is subsidized and it's a really great benefit never to be marked to market.

As long as you can pay the mortgage you are free to go way underwater. These mortgages are a great way to get some short USD exposure, we are all usually already very long there; so they probably improve the mean:variance ratio of a person's global portfolio quite a bit over all possible future paths if we are denominating in buying power rather than USD.

I like that last paragraph, it's a good way to think about it.

 

[murray t turtle]

We can agree that to each his own and we all have to live within our comfort zone.
Leverage is not bad if you have consistent positive cash flow irregardless of the short term outcome of your "carry trade".

Buffett achieved his outsize return because his company used leverage (~1.7x effective leverage) and his debt carrying cost is negative. Without it his returns would have been a lot less impressive.

%%
Different deal;
WB has his small home paid for.
And also 2019 virus shoWed many people there was REALTY risk we never though of; fire that financial advisor.
100% of foreclosures are financed..................................................
Of course if someone does not mind paying someone else rent/ thats a different deal also. Good points about ''consistent cash.............................................................''

 

[engineering]

%%
100% of foreclosures are financed..................................................

This. You're risking your home unnecessarily. Just search "mistaken foreclosure".

I notice a strong tendency among some to always assume that all contracts are properly honored, and are handled fairly, and that all big bank counterparties are trustworthy.

It's not just the banks that are a risk but the gov't as well. Look at what was recently done WRT to failure to enforce rental contracts. The rule of law is becoming less dependable with each passing day.

What's to stop a dictate that either:
a) There shall be a "moratorium" on all appeals of foreclosure proceedings
b) Simply bans all previous mortgages, by requiring that they include some newly invented feature. (Right when rates start rising again of course)

For a couple more realistic examples:
c) What if you want to sell, but the firm holding your note has gone bankrupt? You may have to sit around waiting and possibly have the buyer walk.
d) What if the firm you invest your money with happens to be the next MF Global and they "lose track of it"?

 

[murray t turtle]

This. You're risking your home unnecessarily. Just search "mistaken foreclosure".
I notice a strong tendency among some to always assume that all contracts are properly honored, and are handled fairly, and that all big bank counterparties are trustworthy.
It's not just the banks that are a risk but the gov't as well. Look at what was recently done WRT to failure to enforce rental contracts. The rule of law is becoming less dependable with each passing day.
What's to stop a dictate that either:
a) There shall be a "moratorium" on all appeals of foreclosure proceedings
b) Simply bans all previous mortgages, by requiring that they include some newly invented feature. (Right when rates start rising again of course)
For a couple more realistic examples:
c) What if you want to sell, but the firm holding your note has gone bankrupt? You may have to sit around waiting and possibly have the buyer walk.
d) What if the firm you invest your money with happens to be the next MF Global and they "lose track of it"?

%%
Good ones;
always been a bit risky to count on renters to mostly pay a mortgage/LOL.
And even some wild stuff\never even thought of; mob of redneck farmer/ranchers shoW UP @ bank forclosure auction, '29-1930's + surround the dirt cheap bank buyers+ buyers so to speak + stop it. IN theory the sheriff would help the bankers , in practice /DID NOT happen, in many cases....................................................................................
IF i had to live in So CA i would want to rent briefly or camper/motor home;RE =
waaaaaaaaaaaaaaaaaaaaaaaaaaaaaaay to HI+ now Walgreens moving out=organized theft, cops dont enforce thefts under $1,000, according to news=most likely true

 

[Hari Seldon]

Exactly. If you refinance at 2% and the loan is assumable it has a value of its own in an inflationary market. The buyer has to qualify, of course.

I remember 15% mortgages.

I was a Controller for a large builder in NOLA and I remember commercial money at 21.5% and VA at 17.5%.
When the rates got below 10% there was a lot of rejoicing in the industry.

 

[Perilace]

It's kinda difficult to pay mortgage when you're matured, because gradually you have less material resources to do it. Nevertheless, the vast majority of financial organizations offer some things like restructurization of your loan or something like that. You have to take a new loan in order to cover old debts. It always works quite properly, however it's easy to dive into debts and fall into the debt pit. So, here we should be much more attentive. If you have no resources to pay mortgage you can file for bankruptcy. In case you will be admitted as a bankrupt, then you can hope for deleting all your debts, but it's quite difficult.