A conundrum
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The financial illiteracy of lemmy users always amazes me.
PMI is not double dipping.
It keeps the risk reasonable so that interest rates can remain reasonable.
With no PMI there's extra risk that would need to be priced in to interest.
No one likes PMI, but it's not evil.
Ok, your loan has been determined to be higher risk therefore you have to pay more. Why did we need to invent a second payment called PMI instead of just charging a higher rate to higher risk borrowers? Why do interest rates need to remain "reasonable" ?
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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.
I think the point is that properties on market are, as a rule, not very recently purchased with a 30-year mortgage. So the monthly cost now required to cover the owners costs may be based on financial conditions from 6 years ago. If the rental market has a lot of properties that have been held a while but house values have rocketed, then you have a critical mass of owners willing and ready to out-compete brand new mortgage rates even if they ignore their equity advantage.
In my area, that's what we see, real estate prices are dramatically up as are interest rates, so mortgage cost to acquire is a fair amount above the going rate to rent comparable properties. Someone getting a 30 year mortgage to rent out a property would be underwater for very many years in the current market conditions around my area, as they have to compete with more aggressive owners that have had their properties for many years.
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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.
I never said it was free and I never said it wasn't a debt. Like obviously it is a debt, anyone that reads "tapping into home equity" as meaning free money doesn't understand basic finance.
It doesn't have to extend your mortgage. You can take it out as a second line of credit as an additional loan to pay back monthly. Obviously the ideal would be to have the savings to cover necessary home repairs, but if you don't this is typically the cheapest way to get a loan to do necessary maintenance.
Sounds like your sister used her equity to refinance her loan and recieved a payout for the difference. That's going to restart your mortgage and is probably not the best way to go about accessing home equity.
So yeah don't take on reckless debt you can't payback. You can responsibly use your home equity for maintenance if you need to though.
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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.
If the landlord has a 10-year mortgage they just took out, the rental market wouldn't cover that, because that landlord is competing with comparable properties that didn't choose that amount. They are also competing with people that bought the property a decade ago and don't have the same mortgage burden. They are also competing with some that even considers their accumulation of equity a component of their wealth and wouldn't mind being mildly underwater early in their loan for the long term advantage.
At least in my area, the way the real estate market has worked out is that renting is about 10-15% lower than monthly expense for a 30-year purchase after 20% downpayment. If the real estate bubble pops, that will probably flip back around, but for now, the renters are getting a discount for short term, which in my opinion is the way it should be, renters getting a bit of a break for their equity disadvantage. In a sane market, the renter gets a cheaper payment that makes financial sense for 2-3 years in a property rather than being forced to rent by an owner class making new ownership impossible.
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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.
wrote last edited by [email protected]Damn $4300 a month. I thought my $2600 was steep.
Right before we moved my rent had gone up to $2500 so it was a push. Now when we first started living there the rent was $1400 and the landlord had even refied so his mortgage was cheaper at the end. When we were moving out and he drove up in a brand new Rivian that I’m pretty sure I basically paid for…
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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.
I never thought I'd end up at a place in life where I worry about real estate valuations, but here we are. In my condo building, things are getting decrepit. I wondered why no one else seemed to care then I realized I'm in the minority of owner-residents, every one else rents out, so they don't care about how it looks. They just care about rents coming in.
Then I wondered why they don't care about losing value, then I realized, no one is losing value, some units here sell for the same price as a single-family home in the suburbs, even with the graffiti and homeless people wandering the street.
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Covid was the wake up call I needed to realize that while I understand the nuance many others need the point made for them to understand the point of the scenario. We understand Eleanor. Some understand Callum.
I'd wager a lot more than some need a Callum to explain what they should think about anything, given the state of things.
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And while we're ranting about this, can we throw PMI and whomever came up with it on the bonfire where they belong?
Your telling me that I need to pay for you to have insurance in case I default while your also charging me interest who's very purpose is to offset risk? Why am I paying to offset your risk FUCKING TWICE AND HOW IS THIS FUCKING LEGAL.
Shit infuriates me. I want all the bankers to get William Wallace on live TV, recorded and played back once a year during a mandatory viewing window so that we never, ever, forget.
This is one of the reasons my wife and I took so long to get a house. I refused to pay this absolute SCAM. So we saved up to put 20% down. What a crock.
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The first time I applied for a loan, I didn't have a credit card yet. And they were like:
How can we know you're responsible with money?
Because I haven't needed credit in the past and I'm still alive, idk? Having enough liquidity to not need credit would seem to suggest I'm good with money.
But maybe your parents are paying for everything
Ok? How does using a credit card change that?
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Even just renting an apartment is full of bullshit.
"The apartment is $1300 a month."
"Perfect, I make $2000 a month."
"No. You're gonna need to make $3900 a month before we will rent to you."
you're not gonna be able to afford this apartment after a few years of 10% rent increases, and we don't want the inconvenience of evicting you when that time comes
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I saved up a big (to me) chunk a few years ago, thought I was there. Expected the red carpet to roll out. Nooooope. There were people buying houses for $100k more than the asking price, sight unseen, within a week or two of the house being listed. My little $40k deposit was adorable, in comparison. I had no chance. Then Covid, life, etc...
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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.
you need to pay us interest because we're taking the risk. Also you need to give us a down payment to offset our risk.
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"Landlords" are probably one of the oldest grifts in the book.
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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.
wrote last edited by [email protected]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.
That's commie talk son. We pull the ladder up behind us in America.
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You live in Germany don't you
wrote last edited by [email protected]Is it a thing to find German mortgaging standards whacky?! I finally feel heard! Basically everyone here seems to pick up 35+ year mortgages with seemingly low monthly expenses, but the overall amount of interest they accumulate over that time is absolutely insane! And still, everyone says that you shouldn't pay more than 30% of your monthly income into your mortgage. It's hard to even find a bank that allows you to pay for a decent Sondertilgung each year. And don't even get me started on that whole Bausparvertrag system, because I have no idea what is going on with it or why anyone would ever do that
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Damn $4300 a month. I thought my $2600 was steep.
Right before we moved my rent had gone up to $2500 so it was a push. Now when we first started living there the rent was $1400 and the landlord had even refied so his mortgage was cheaper at the end. When we were moving out and he drove up in a brand new Rivian that I’m pretty sure I basically paid for…
Yeah, I went from $1200 rent to a $1300 mortgage but the city added $50k more value to the assesment so between taxes and insurance it's going up to $1700/mo next year so that's fun. I don't know how many more years of that I could afford cuz $2600 just isn't doable for me
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I never said it was free and I never said it wasn't a debt. Like obviously it is a debt, anyone that reads "tapping into home equity" as meaning free money doesn't understand basic finance.
It doesn't have to extend your mortgage. You can take it out as a second line of credit as an additional loan to pay back monthly. Obviously the ideal would be to have the savings to cover necessary home repairs, but if you don't this is typically the cheapest way to get a loan to do necessary maintenance.
Sounds like your sister used her equity to refinance her loan and recieved a payout for the difference. That's going to restart your mortgage and is probably not the best way to go about accessing home equity.
So yeah don't take on reckless debt you can't payback. You can responsibly use your home equity for maintenance if you need to though.
wrote last edited by [email protected]Second line of credit or mortgage, its still debt. The two are equivalent because you could also make more mortgage payments to pay it down quicker.
Your suggestion translates to "Don't worry about home repairs, just take on more debt to pay them."
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The first time I applied for a loan, I didn't have a credit card yet. And they were like:
How can we know you're responsible with money?
Because I haven't needed credit in the past and I'm still alive, idk? Having enough liquidity to not need credit would seem to suggest I'm good with money.
But maybe your parents are paying for everything
Ok? How does using a credit card change that?
Considering how much data they can get on anyone, this process seems pointless and outdated, except to give them somewhat arbitrary power over who can get a loan.
Not that I like such private data to be available at any institutions fingertips, but so it is these days. -
"Landlords" are probably one of the oldest grifts in the book.
Mao did nothing wrong.
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Second line of credit or mortgage, its still debt. The two are equivalent because you could also make more mortgage payments to pay it down quicker.
Your suggestion translates to "Don't worry about home repairs, just take on more debt to pay them."
wrote last edited by [email protected]Once again everyone knows that is debt. Of course it is debt. Once again if you don't understand that taking out a loan = debt you don't understand basic finance.
It just so happens to be the lowest interest form of debt you can take and even when added with an existing mortgage payment is still insanely cheaper than comparable rents for the same property.
My statement is "yes homes have maintenance and that can come at unexpected costs. However you can access low interest debt if you need to. And even if you do you'll still pay less than renting a comparable property for the same amount of time"
Please consider the whole and dont just take snippets out of context. Homes come with costs, still way cheaper than renting. You don't have to take out a loan for home maintenance. You can, but you don't have to.
One final note, debt doesn't necessarily have to be bad. You should never take on debt you cannot afford but if utilized wisely you can maintain cash reserves for emergencies and build your credit. Credit scores are made up bullshit, but it's a system that we're trapped in. With a better credit score you can get much better terms on certain things that we need to survive. It's better to take on a manageable debt that at least gives you some benefit than to dump your money into some landlords profit margin.
