Considering not ever owning a house again.

[cjscully]

What isn't being taken into consideration in the discussion about the "true cost" of the loan is that the interest is tax deductible. While that doesn't offset all of the interest, in most cases it will offset between 23-39% of the interest depending on tax bracket.

Though housing remains somewhat unstable nation wide, I don't know of a twenty or thirty year period in history where real estate values were lower at the end of the period than they were at the beginning of the period. So some appreciation would need to be factored in. I think it's pretty safe to say that if you bought a home and lived in it for 20 years, paid it off and sold it you would actually make a profit. How much of a profit depends on the interest rate paid and the overall appreciation of the property.

Now let's take renting a house or an apartment. Your rent pays your landlord's mortgage and (if he's smart) puts money in his pocket. It does not build up any equity for you at all. If you pay $400/mo for 20 years, you're paying out $96,000 to your landlord and when you move out you have nothing to show for it.

Seems to me that even if you're paying out $102,000 for a house that you own after 20 years, that's still better than paying out $96,000 over the same time period and having no asset when you're done.

Having said all that, profitability of the home as an investment is usually not the reason people buy houses to live in. A place for the kids to play, a garden, etc. are usually the reasons people want to own homes.

[Seeker]

What isn't being taken into consideration in the discussion about the "true cost" of the loan is that the interest is tax deductible. While that doesn't offset all of the interest, in most cases it will offset between 23-39% of the interest depending on tax bracket.

Though housing remains somewhat unstable nation wide, I don't know of a twenty or thirty year period in history where real estate values were lower at the end of the period than they were at the beginning of the period. So some appreciation would need to be factored in. I think it's pretty safe to say that if you bought a home and lived in it for 20 years, paid it off and sold it you would actually make a profit. How much of a profit depends on the interest rate paid and the overall appreciation of the property.

If you bought your house at the peak of your local pricing, say 2008, say California or Nevada, what you say above might not hold true. If you bought your house in Detroit before the automobile crisis or in any real rural town depending on a manufacturing industry that no longer exists in that town, those houses will not sell. Not at any price. Not until some form of industry/jobs/education returns to that locality.

Now let's take renting a house or an apartment. Your rent pays your landlord's mortgage and (if he's smart) puts money in his pocket. It does not build up any equity for you at all. If you pay $400/mo for 20 years, you're paying out $96,000 to your landlord and when you move out you have nothing to show for it.

Seems to me that even if you're paying out $102,000 for a house that you own after 20 years, that's still better than paying out $96,000 over the same time period and having no asset when you're done.

Having said all that, profitability of the home as an investment is usually not the reason people buy houses to live in. A place for the kids to play, a garden, etc. are usually the reasons people want to own homes.

I agree with everything else you say, but timing is everything. Local economy plays into whether or not you are forced to move. Neighborhoods change over time. Everything changes over time.

Generally I believe you are correct. But there were people who bought at the peak, who may never see their homes appreciate greatly in value.

----

Scanner, I feel for your situation. Only you can know what is best. If you can truly get a deal and feel that there will always be jobs (and I think you are pretty much self-employeed as a MD?) in your location, then probably you will long-term be fine with choosing a solid home for you and your children. If you feel that sooner or later you might want to move your practice, to another location, then rent. You have to feel comfortable with whatever you decide to do.

And right at the moment, you are feeling too much hurt and pain to make a "home" decision. In your position, I'd probably rent for awhile.

[thefamilyfinanceguide]

Current Financial Situation First

Maybe you have done this already, maybe you haven't, but you should write down all your debts and liabilities you have now. Before even thinking about getting house, get rid of any credit cards, car payments in your name, etc. With the divorce finalized, pay your portion of any joint debts. Make sure get to get the court documents to state your liability. After all that, estimate your cost for utilities, food, and weekly transportation costs (i.e. gas). Either save up cash to buy a home (I know it sounds ridiculous), or get a loan in which the mortgage payment (including taxes) per month is 1/4 or less of your take-home pay.

Just buy a home does not warrant it an investment. A home is always an asset if you owe less than its worth. The point here is not to buy a home for sake of buying a home. Location Location Location. Get the best school district you can. If you have to wait a couple years to save on a down payment. Then do that. Don't get caught up in the news on housing, markets, China, politics. Buy a home that is in an area where your family will prosper, the collective of the community will appreciate the value of the home so when you retire you have a boost of income. Note, get money into a retirement account every payday to (15%)!

[Scanner]

My liabilities are only this:

Business LOC: $13,000 (tapped for attorney expenses and new EHR software for ObamaCare - stimulus money next year should help pay down)

Car is paid off - 1999 Ford Taurus.

Child support: $600/month (includes daycare cost in there)

I have kids 40% of time and getting into the same school district as to where they live. The schools do "joint custody" bus stops. Whether our schools are good enough or not is debatable.

I am not in the free and clear yet anyway - my ex-wife is dragging her feet paying me out my home equity and now wants to take me back to court and do a "Do-Over" with the divorce as she doesn't like the settlement terms. She is claiming her attorney didn't explain everything to her enough (malpractice on her attorney?)

So. . .everything is in flux for me. . .I may just hunker down in my parents beach trailer til I figure out if she's going to legally harass me any more.

[timotheus]

Hi Scanner, new to the forums here. Your post really talked to me, because I've been pondering this A LOT over the last couple years. (from a year or so before the bubble to now.) Financially, I think it's a wash in the long run. With renting, yes you are "throwing money away" but that ends up being close to what property tax, maintenance, and so on are on a home which you don't get recuperated from when you sell that home. With renting, if you have the discipline to do so, you can take that money that isn't locked into a home and invest it other ways.

This is the conclusion I've come to.

Renting is best IF you're not one who customizes, want your housing to take minimal upkeep, and like the ability to move around.

Buying a home is best IF you want to make a "dream home", want to make a home exactly how you like it, and so on.

[Ima saver]

I purchased my first home when I was 21. I got it paid off by the time I was 32 and I have traded up in home, with no mortgages, 4 times. I now live in the 3200 square foot house "of my dreams". (custom built)
I pay $2200 in property tax and about $1100 in house insurance per year. That is a lot cheaper than paying rent each month. My house was built correctly (by my dh), so it has not needed any maintenance yet, other than pressure washing. The home is 15 years old.

[Scanner]

Ima saver:

But that's just it - you lived and breathed in a generation of exponentiating home prices. I guess as a Generation X-er, I can't relate to a home being a good investment. In fact, I was listening to NPR the other day (I do love NPR) and they had a conservative panelist on from the Weekly National Review (I think he was the editor) who made a great point in the discussion on the economy:

Our whole system of wealth accumulation has come to an end and President Obama's agenda (and Bernacke/Geithner) is to artificially prop up a real estate market with low interest rates and stimulus that is really never going to come back or do what it did for my parents.

We should just move on as a nation. . .the Boomers built a bubble and it popped and it's over.

My parents bought their first home for $15,000. Even after the crash it's worth about $150,000 30 years later.

Now. . .I did just make an offer on a $140,000 "grandma house" on Friday. (the woman is in a nursing home and they are demanding liquidation of her estate)

Can I really expect it to be worth $1,400,000 in 30 years like my parents? Stranger things have happened but I don't think so unless the price of a Coke climbs to $12.00.

I know you all (and I thank you for your patience) watch me flipflop on this multiple times in a month. I hate being under this pressure so I delegated to my agent, a good friend and patient of mine for 13 years, to make sure that this place is a "steal." I believe her when she says it is. It's a CapeCod layout, 1 bathroom, 3 bedrooms, flexing for a 4rth/den, hot water heat/oil, no central air and it looks like the older couple kept it as good as a dollhouse. So, in the end I am buying, not retning.

But that's only because the rental market is so tight in my area. It's hard to find a house to rent and with 3 kids of all different ages, I do need a house. An apt. just wasn't going to swing it. I did find one house who had 50 inquiries very interested in me, because of my credit and the prospect I would be a long time renter, but it was out in the stix and my kids need other kids to play with. . .so I found this house to buy.

Anyway, if I can get a 15 year mortgage at 3.75% and I am putting 20% down and keeping the rest of my money for a EF, my mortgage and taxes will be $1000/month. In the end, it will be cheaper to buy than rent anyway.

Sorry I have been so all over the place. . .

[Ima saver]

You are right. I did buy a house at a good time. My first home was $13,000 for a brand new 3 bedroom, 2 bath home.
But there are some pretty good bargains out there right now. I could not imagine paying rent, but I also cannot imagine paying the BIG house payments so many people are stuck with. That is why, when I get a loan, I tend to pay as much extra on the principal as I can, every month. I always pay everything off early.