A conundrum
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You're overthinking it.
The loan history is not relevant. The $50k you paid is gone. Sunk costs fallacy and all that.
A mortgage isn't a complicated shared equity situation.
You owe the bank $650k and if you don't pay they will take the house worth $600k.
Obviously if you default there will be legal problems and you're still on the hook for the last $50k and so on, but there's no incentive to keep paying. Like if you declare bankruptcy then you don't have to pay the $50k and you can start saving for a deposit on your next house for when the exclusion period expires.
Declaring bankruptcy would only be beneficial if the housing market fully crashed and it went down in price significantly and you don't think it'll be going back up within the next few years.
Not to mention it'll be a lot harder to get a house in the future if you did that, and you'd get all the other downsides of bankruptcy as well.
Not to mention, this is all under a stay that assumes you'd actually be able to buy a house without a significant deposit.
Under the current system, it'd be an even bigger setback because if the house did lose a lot of value, now you're also out a huge amount of money, still have to pay the full loan anyway, and it might take years to save up enough again to get a future house.
Basically, the banks are operating more as insurance gamblers now than they are lenders, because no matter what they win big. Even though banks should primarily work as centralized financial institutions rather than businesses, because otherwise they cause huge ramifications for the economy.
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The bad take I was referring to was OP claiming the mortgage payment would be lower than the rent payment. In the US this is almost never the case. Edit: we have fixed rate mortgages in the US. My payment will only go up because of taxes or insurance.
Most countries have fixed-rate mortgages. Most rental properties are also mortgaged. So a renter is paying for maintenance/insurance/tax costs, the landlord's profits margin and the landlord's mortgage.
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But what you're saying is simply not true. Where I live you have to provide 20% of equity to get a mortgage but you can't default when the prices go down. No bank offers mortgage covered in 100% by the house. If you owe the bank $600k you owe then $600k, that's it. If you default and you're house now only costs $500k you still owe them $100k.
So the 20% requirement has nothing to do with negative equity protections. It's to limit the banks exposure in case you're unable to pay.
Sorry chief, you're just not picking up what I'm laying down.
Of course you still owe the money, you're just much less likely to pay.
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Sorry chief, you're just not picking up what I'm laying down.
Of course you still owe the money, you're just much less likely to pay.
I don't know how this works in US but where I live when you owe bank money they will simply garnish your wages and benefits. No one is defaulting on their mortgage to save money. That's just not a thing. I personally know people who were paying their mortgages for many many years even though their house was worth way less then the mortgage. You just suck it up and hope the price will eventually go up. If it doesn't it's still better then living on the street.
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What we have isn't capitalism those banks should have gone under
Whatever system America is, is capitalism.
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The corrosive corollary to ever-rising real estate valuations is that there is no incentive to keep buildings like condos nice or neighborhoods clean, someone will buy at the inflated price anyway since they all are inflated.
So basically I feel in Canada we live in a system that pulls valuation out of thin air, produces nothing, incentivizes no one, yet allows everything.
Same shit happening in Scotland. Knobheads makin bids above asking price on slum complexes in the city like it's fooken millionaire row. Last landlord I had chucked a new tenant out and returned her deposit for complaining about the broken shower basin cos he cannae be arsed. Not exaggerating.
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People don't want to twerk anymore!
At this point, yeah I would twerk on OnlyFans just to get a mortgage..
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Bad take. In my situation it went from us paying $1900 in rent to paying $4500 in mortgage.
It depends on the market. Around here is similar, the market rental rate for a house is lower than what even the most lowest realistic monthly mortgage payment would be, but only by about 10% or so. I don't know if you also dramatically upgraded your home quality.
Not too long ago around here it was the same as the post, renting higher than mortgage.
Even then over long term, the mortgage would make sense, since you can sell and get back some of the money and your principal and interest won't magically get bigger because of market conditions.
In a sane world renting should be a touch cheaper than mortgage over the first few years, with tenants that only plan to be there 2 or three years. The owner gets a little income while taxes and insurance get paid and their asset maintained, and the tenant gets an easier and cheaper house to move in and out of for a short term living arrangement. Problem being when the market is upside down and when tenants are stuck never being able to build equity.
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Yeah, the 3x salary requirements are insane when housing accounts for almost 50% of people's take home pay in most places.
3x rent is pre tax, 50% is after tax.
Just a small clarification.
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You live in Germany don't you
Or any country with responsible lending rules.
Lenders are not your friends. They'd take your organs as payment if they were allowed. The rules are there to stop them doing bad lending and then hounding you to your death.
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Same shit happening in Scotland. Knobheads makin bids above asking price on slum complexes in the city like it's fooken millionaire row. Last landlord I had chucked a new tenant out and returned her deposit for complaining about the broken shower basin cos he cannae be arsed. Not exaggerating.
It's mad given that Scotland technically is quite pro-renter. You just can't enforce anything so landlords have learned not to give a fuck. A friend viewed a tennament they were trying to let with no kitchen (as in no cooker fridge or sink). Like something out of trainspotting.
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The bad take I was referring to was OP claiming the mortgage payment would be lower than the rent payment. In the US this is almost never the case. Edit: we have fixed rate mortgages in the US. My payment will only go up because of taxes or insurance.
All rents cover mortgage, taxes, insurance, upkeep, and usually a percentage profit on top of it all. Unless your lord is renting to you at cost or below (in which case they're losing money (not counting equity)), then there is no way the cost to rent would be higher on an equivalent property.
Like just imagine if you wanted to rent out your property for $1900/mo - you couldn't do it.
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The deposit is not to prove you can make the repayments.
Housing markets do, occasionally, go backwards in value.
If you have a loan for a house which is more than the value of the house you would have an incentive to just stop paying.
Thats why the bank needs a buffer, in the form of a deposit. Its not really nefarious.
It's a little nefarious
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All rents cover mortgage, taxes, insurance, upkeep, and usually a percentage profit on top of it all. Unless your lord is renting to you at cost or below (in which case they're losing money (not counting equity)), then there is no way the cost to rent would be higher on an equivalent property.
Like just imagine if you wanted to rent out your property for $1900/mo - you couldn't do it.
My old house went up over 400k between 2019-2025. So, if I'd sold it in 2019, they could absolutely afford to rent to me at a lower price than if I tried buying it again.
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My old house went up over 400k between 2019-2025. So, if I'd sold it in 2019, they could absolutely afford to rent to me at a lower price than if I tried buying it again.
Yeah that's the vagaries of the housing market and valuation, which is why I said equivalent property.
There's also no reason you couldn't sell that house for 400k less. The value is just the value. It's going to be the same whether you're renting or paying the bank for the same property.
I also won big by buying prepan, but who's up or down in the Canadian housing lotto doesn't change the physics of paying a lord's mortgage costing more than if you were paying the bank's mortgage directly.
Nevermind that whoever gets to be lord keeps the equity.
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It's a little nefarious
nefari-ish, if you will.
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I always find this to be such a poor argument.
Yes unexpected maintenance can sometimes be a huge problem, especially in the first couple of years, but after that you can tap into home equity and repair say a roof. Everything else while expensive is still cheaper than renting. Using the OP's example 1k vs 500, I can assure you you will never have consistent 500 repairs per month.
As for the taxes the people in my city nearly went ballistic when the city increased the rate by 5%. At the end of the year it costed me $200. Per month that's about $16. I've never lived in any apartment anywhere where rent didn't increase by at least $50 per month each year. Even if someone had a home twice as valuable that's still a very small monthly cost.
Additional once you get past the first 3ish years rent prices have greatly outpaced your mortgage and you will be saving a lot of money compared to of you were renting.
I'd like to wrap up with a question. If owning a home was such a sink of resources why do people become landlords?
after that you can tap into home equity and repair say a roof.
There's no, "tapping into home equity." There's only extending the mortgage with more debt.
20 years ago my sister did all sorts of home improvements that she said were free because she was "tapping into equity". Now she's nearing retirement and complains she still has giant mortgage payments.
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I went from an apartment that cost ~$1250/mo. To a mortgage that costs ~$4300/mo. Just got the "privilege" of owning a home (and paying for all repairs myself).
I can only afford this because of the people I'm sharing that cost with. We're all on the deed, and we all have a stake, and claim to, the house. Four of us.
My payment didn't really change.
The only way we could get to the point of a down payment is that one of the four of us has been saving for something like this since they were in highschool. Because of their effort, we had enough for a down payment.
And I'm lucky to be in this position.
What a fucking crock of shit.
Despite all of this, I'm hoping the market takes a dive so the rest of you can do the same at a much more affordable rate. I've already spent the money and I'll be spending years paying it off. I didn't buy a house up objectively save money, I bought a house for stability. I never want to move ever again. There are good reasons for that which I won't get into. I promise that I will have ZERO issues if you all get a better deal than I did. I hope you do, and I hope the housing market, specifically the rental/flipping/"income property" markets crash, hard.
In the same way, I've paid off my school debt, I'm in favor of school debt forgiveness. I also enjoy pretty good health, I'm in favor of universal healthcare. I've never caused, not been the victim of a fire, I'm in favor of fire departments.
I could go on.
Good luck everyone.
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You can't even get an apartment here without making a ton of money. Cheapest studio apartment here is $1,500 a month. I have to prove i make $4,500 a month just to barely qualify, which i don't. Then they charge you so much for application fees, and then utilities they overcharge for, it's all a scam.
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All rents cover mortgage, taxes, insurance, upkeep, and usually a percentage profit on top of it all. Unless your lord is renting to you at cost or below (in which case they're losing money (not counting equity)), then there is no way the cost to rent would be higher on an equivalent property.
Like just imagine if you wanted to rent out your property for $1900/mo - you couldn't do it.
Actually, not necessarily.
In my local market, a house that would be about $2700/month in mortgage/insurance/taxes on a 30 year term after a huge downpayment would rent for about $2400/month right now.
There are some owners that in fact do count the equity, so they are willing to buy higher and be upside down compared to what a mortgage could be. The recognize the rent is only part of the income, that the property value going up is a potential gain to cash in that's worth a few hundred a month to 'deposit'.
Especially if the owners can pay cash and not incur the interest associated with a mortgage. It's a bit of an odd choice right now as just letting the cash sit in a savings account offers competitive ROI with the current interest rates, but you've got a lot of property bought under previous conditions.
This only holds for relatively short term though, you'd expect rent hikes to go to $3000/month within a time period where that ownership monthly payment might only go up to $2800/month due to taxes and insurance rates. So 10 years into living somewhere you are now paying more to rent it than you would be if you had purchased comparable, even ignoring the equity part of the equation. If you include equity, then you better be planning to get out in 2 or 3 years at the most if you are embarking on renting, otherwise it's much much better to buy even with higher mortgage payment, since you can cash in on the equity if you need to, eventually.
I'd say this is a relatively sane fiscal model of renting, that you need to give the renters a discount reflecting their lack of equity. I'm kind of glad to see rental rates being below mortgage rates in my area right now. That said, it wasn't too long ago that rental rates in my area were higher than what mortgage could be, but large companies bought up housing stock and made it supremely difficult to actually buy as a private party. With the interest rates jacked up, those companies are cooling it a bit since they don't have access to 'free money' anymore.
