A conundrum
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Then there's all the expenses you didn't know about before you bought the house. If you don't have at least some DIY skills, you get to pay people a lot of money to fix things for you.
...BTW, the county just did a reassessment on your property and your property taxes have now doubled. In exchange, you get nothing. Congratulations.
Also, the 500 is just the mortgage payment. It doesn't include the insurance and property taxes and, at least in the USA, private-mortgage-insurance (pmi) if the down payment isn't at least 20%.
The monthly obligation can easily be more than that 1000. The savings is in locking the first half in at a set amount.
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I am coming to realize that my rural perspective is pretty different, and that lots of people live in way higher cost of living areas than I do. My biggest suggestion is if you don't like expensive housing, get out of the city.
If city folk starts coming to rural area, they will start complaining that city people are jacking up property prices.
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If you were in negative equity, you might choose to suck it up and pay.
Statistically however, borrowers are much more likely to default when they're in negative equity, because quite obviously, there's an incentive to declare bankruptcy.
If you owed a million dollars on a property that had been condemned and is only worth $50k, obviously you would declare bankruptcy. If the property was worth $400k you'd probably do the same. If the property was worth $800k you might do that, but you might choose to suck it up.
My point is, negative equity is an incentive to default on the loan.
Obviously, defaulting on mortgages is a thing. Obviously, people are much more likely to do so when they're in negative equity.
This isn't something people do as a sophisticated well planned financial strategy. In a context of economic upheaval, declining property losses, usually because of unemployment, which usually causes family breakdowns.
Obviously, defaulting on mortgages is a thing.
In USA. As I explained in Europe it's not a thing. Own contribution is a thing in USA and Europe. Therefore, banks don't require own contribution because of defaults. Q.E.D.
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I am coming to realize that my rural perspective is pretty different, and that lots of people live in way higher cost of living areas than I do. My biggest suggestion is if you don't like expensive housing, get out of the city.
I tried and here are some places I have looked where the average home is $810,000 come to find out.
Pinedale, Wyoming, USA
Ennis, Montana, USAThese are in the mountains about 1 hour from the nearest big city of Jackson, Wyoming and Bozeman, Montana. I guess I need to look in the deep sticks.
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Obviously, defaulting on mortgages is a thing.
In USA. As I explained in Europe it's not a thing. Own contribution is a thing in USA and Europe. Therefore, banks don't require own contribution because of defaults. Q.E.D.
What do you call it in Europe when someone stops making repayments on a loan ?
Obviously, that's a thing.
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What do you call it in Europe when someone stops making repayments on a loan ?
Obviously, that's a thing.
I meant that intentionally defaulting on a mortgage when the property loses value and not paying the debt is not a thing. That's what we were talking about.
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Was it in a desirable location? Our tourist town went out of control with our of state buyers during the pandemic, but property values have adjusted back some and the market competition is gone. If you still have some of that $40k now might be a better time. My wife and I just did the federal First Time Homebuyers class and wound up getting a USDA rural development loan, they wouldn't even let us put a down payment to lower our payments.
I am a skidmark that cannot believe that I live in a house that I "own"(have a mortgage). And I am so much less pessimistic about anybody's potential to do what I did. I am happy to answer some questions. I make $22 an hour and my wife makes $17, the loan officer told me I almost make too much for the program.
Yes, at the time, I was hoping to buy in the Salt Lake Valley and it just wasn't feasible. Thank you for the tip, I will read up on the USDA loans.
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Foreclosing is a very expensive process.
If you borrow 100% of the purchase price and the bank has to foreclose they would incur a loss.
Oh no, their own process that they made for being given a house is so expensive, I feel so bad for them!
Why are you defending them so hard? You just have to look at their quarterly financials. They're making out like gangbusters.
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except for causing that famine.
Eh, what's a little famine among friends.
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I tried and here are some places I have looked where the average home is $810,000 come to find out.
Pinedale, Wyoming, USA
Ennis, Montana, USAThese are in the mountains about 1 hour from the nearest big city of Jackson, Wyoming and Bozeman, Montana. I guess I need to look in the deep sticks.
Are you really confused why those properties are expensive? Those are both desirable locations in regions with quickly growing populations. How about Livingston, or Butte?
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if residential properties are cheaper per square foot than storage units, then absolutely
Yep, that was a litmus test to determine if you're worth my effort. You failed.
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Hmm. What if we abolish private property?
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I meant that intentionally defaulting on a mortgage when the property loses value and not paying the debt is not a thing. That's what we were talking about.
Who is more likely to default, a borrower with $100k equity, or a borrower with negative $100k equity?
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Who is more likely to default, a borrower with $100k equity, or a borrower with negative $100k equity?
Read my other comments. I answered this already.
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Read my other comments. I answered this already.
Read my other comments, explaining why people with negative equity often default on their mortgage.
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Read my other comments, explaining why people with negative equity often default on their mortgage.
Not in Europe.
(this is fun. let's keep doing this forever!)
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I've never paid a mortgage, but £500 seems pretty low. Do mortgage payments tend to be that much cheaper than rent prices?
£100,000 over 30 years at 4.5% would be £506 a month. That plus the stipulated £25,000 deposit will get you a bungalow or terraced house near me as of about 18 months ago. Rent in my area starts at around £700 for a house outside of town or a single room in town.
So yes, £500 mortgage is possible. Rent being twice the cost of a mortgage for a similar property is fairly common. Banks and landlords being shitheads is guaranteed.
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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.
Ah yes, I could see that situation arising, although frankly I'm as surprised to hear of landlords competing for tenants as I would be to hear of them selling their properties for under market value. Not that I'm doubting your honesty--it's just not been my personal experience.
I've heard too many personal anecdotes of landlords trying to hike up rates by seeking spurious evictions, or refusing to install climate control, for tenants who are getting a "good deal" at lower rates. Maybe there are rational markets out there, but I don't personally hold out much hope for landlords to be reasonable in the face of the dual pressures of fear and greed.
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Are you really confused why those properties are expensive? Those are both desirable locations in regions with quickly growing populations. How about Livingston, or Butte?
I am as there isn’t anything here. Cows and mountains. I am staying here passing three and it’s just nothing. Normally you would get water front and community features to set the price but none of that is here. I guess the confusing part is what is attracting people here. It can’t just be the mountains.
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Ah yes, I could see that situation arising, although frankly I'm as surprised to hear of landlords competing for tenants as I would be to hear of them selling their properties for under market value. Not that I'm doubting your honesty--it's just not been my personal experience.
I've heard too many personal anecdotes of landlords trying to hike up rates by seeking spurious evictions, or refusing to install climate control, for tenants who are getting a "good deal" at lower rates. Maybe there are rational markets out there, but I don't personally hold out much hope for landlords to be reasonable in the face of the dual pressures of fear and greed.
So back when I rented, it was only two landlords and only three years and it was fine, so I was spared the slumlord experience. In fact, my second landlords were a very nice couple, and when I got laid off they actually waived that months rent to help me get sorted.
However those slumlords do exist, trying to evict in face of rent controls, being stingy with maintenance. They however still may be cheaper than a 30 year mortgage, especially if they have no tenant. A tenant might face an aggressive rate hike with the landlord betting they don't want to move out, losing the price advantage relatively quickly. Ultimately if a residence is empty, the owner is aware the tenants are likely cross shopping properties they could mortgage instead, so they have to be somewhat competitive then. So they are very happy when the real estate market holes prices because they can extract higher rents from the property they aren't having to buy in current market conditions. They aren't saints and may treat their tenants like crap, but they are subject to price competition, depending on the market they are in.
