An option for me to buy a house has come up very suddenly and it seemed like a good idea at first - but I look at a mortgage and think “that’s 15 years I’ll spend paying back, at absolute minimum. Probably more like 25 years” - how can I possibly plan that far in advance?
So, how did you feel about getting a mortgage and seeing such a serious commitment stretch so far into the future? I’m mainly talking about the emotional side of things rather than financial
My rent was about $200 bucks cheaper each month but I can sell this and my payments go towards something I own rather than something the landlord owns.
Plus I can upgrade something I own in ways I’m not going to do as a renter.
Rewiring the Ethernet in my house was exhilarating
Property generally increases in value while you pay it down.
My wife and I bought a $400k 3 bedroom flat near the university 8 years ago and we were both scared as fuck. paid $100k off it and just sold it for $600k
That $300k cheque we just used for the downpayment on building a “how do people afford these houses!?!” Thats going to cost $800k. But really our mortgage is only going to go up 20%
It was terrifying. So much more so than buying a car.
I thought of it as “locking in my rent”. For me that helped as my rent kept going up.
Yeah I thought of it as locking in my rent too! But then I found out that my housing payments have gone up each year like rent has. And it’s basically the same cost as renting. Oh well.
Taxes and insurance increase but you have to consider that taxes and insurance is increasing at the same rate for the individuals who own rental properties, which then get passed on to the renters.
Additionally, if you eventually want to move, you’ll usually come out ahead a little bit. I was in a popular market, but I think we bought at 220k and sold at 320k. After all was said and done, I think we had a nice 60k profit, and we did not take the highest offer, we took one from a buyer that we knew was a family that would move in. Not a bad consolation prize for a break up, and I think we were only in it for…3 years?
Selling is stressful, but not nearly as much as buying.
I felt great about it, our monthly mortgage payment was a little less than we were paying in rent, and a portion of every payment was us building equity in our home rather than 100% going to a landlord. I feel even better now, as rents and home prices have skyrocketed where I live, and our monthly payment has only gone up about $300 over 9 years where renters are facing much steeper increases.
It all boils down to your monthly payment, and whether that price is right for you. You need a solid estimate on what your monthly payment will be, to include principal, interest, and escrow to cover taxes and insurance, and see how that amount feels to you moving forward, because it will stick with you.
I bought 2.5 years ago so its still pretty fresh. It was very scary but I knew it was the right lifestyle choice for me. I had lived in my city for 5 years at the time and felt pretty confident (still do) that I want to stay local long term. Just like in all American cities, rents were rising fast.
It felt like I was overpaying at the time because of how much housing prices had risen the 5 years before, but a few months after closing I felt relieved and validated when interest rates jumped to 6%.
can I possibly plan that far in advance?
The good news is you don’t need to. You can do the math to discover how many years you need to own a property in your local area to break even against renting: https://www.nerdwallet.com/mortgages/rent-vs-buy-calculator
You can always sell a house you still have a mortgage on and use your equity to buy something else: https://www.zillow.com/learn/what-happens-when-you-sell-a-house-with-a-mortgage/ The downside to selling a house isn’t the mortgage paperwork, its paying all the fees to brokers and banks to market the property and process the sale.
And finding somewhere to live in the inbetween if the times dont line up can be costly.
but I look at a mortgage and think “that’s 15 years I’ll spend paying back, at absolute minimum. Probably more like 25 years”
Yes! Probably more like 25 (or even 30 years)…at the same glorious fixed payment for that entire time! How many dozen times has your prior housing payment, rent, gone up? Now, it doesn’t. The bank will never ask more from you on principal and interest in the future than it does on that very first mortgage statement.
When I bought my first house I was paying $800/month in rent at an apartment and the mortgage payment was $1000/month. I sold that house 17 years later with the last mortgage payment still being only $1000/month. I checked back on my old apartment to see what the rent was: $1400 for the same apartment I used to pay only $800/month for.
Also, you’re not forced to keep that house you’re buying for 25 or 30 years, but when you leave, its YOUR choice not the landlord’s. When I sold my house I pocketed over $135k in profit because the housing value had gone up in that 17 years.
Glorious I tell ya!
Note that this is an American experience. In Canada, every time you renew your mortgage the interest rates are set at the current rate. So people renewing their mortgages now are paying around 7% interest, whereas 5 years ago they might have been paying 2%.
One of my co-workers had his mortgage payment jump from about $2,500 to $3,500/month a couple of years ago.
Note that this is an American experience. In Canada, every time you renew your mortgage the interest rates are set at the current rate.
Thats very true. Isn’t the longest mortgage rate in Canada something as short as 5 years or so? I have no idea how you guys can manage that. This is especially true with hot housing markets the Vancouver or the GTA where the price of homes already is insanely high.
This is the same in the UK too. Still cheaper than renting though.
If your mortgage is less than your rent, do it.
Even if it’s more than your rent RIGHT NOW, do it.
Your mortgage will stay the same. The rent just goes up.
Well… mostly true. My mortgage has gone up because insurance costs are out of control and the incompetent party running the state refuses to do anything.
Its generally a good move but people can oversell it. Taxes will go up even if the mortgage is fixed. You can’t move easily if you need to go work someplace else or such. Upkeep is a thing and will cost. You can’t easily drop your monthly nut if you lose your job or such. That being said my general rule of thumb is if you can afford a 20% down payment and 15 year fixed and its somewhere you would like to live you should do it. Get a 30 year but make payments like its a 15 year and if you get into a crunch make the normal payment. If all goes well you will be in good stead and if you have to sell you should come out ahead. If you can’t do that much of a down payment then definitely think about it hard and I personally think if your doing a balloon or variable rate your asking for trouble.
There isn’t really much choice and people have been doing it for a long time including my parents so I just have to assume it’s part of adulthood and accept it and try not to let it hang over my head.
Unless you make a lot of money or have help, you will probably have a mortgage if you want a house.
It’s daunting, and it should be. A person can lose a lot of money and time by buying a lemon of a house.
That said, most people don’t pay off their first house, because they move before the 15 or 30 years is up. And that’s okay.
As Dave Ramsey says, “It’s a house, not a marriage.” Meaning, if it turns out a house doesn’t suit you, sell it. You can’t hurt it’s feelings.
Before my first house, I didn’t realize how much I would appreciate not having to get permission to fix / paint / change my own wall / door / shelf / window blinds.
I also didn’t realize how much I would grow to despise having a Homeowners Association (HOA) up in my business.
Bought my house in 2008 so I didn’t think much my mortgage was low as fuck
I was stoked. No more land lord, and instead of paying your landlords retirement you’re paying into yours.
keep building that equity!
I was a bit nervous at the time but looking back it was absolutely the right decision. If you’ve always been a renter, you can’t know the sense of peace that comes with knowing your home belongs to you and you can’t be evicted by someone else’s whim. I wasn’t aware of how it was weighing on me until I was free of it. Yes, I have to pay a mortgage but only a few years later it is much cheaper than local rents that I’d otherwise be paying. Overall it’s a much better way to live as long as it lines up financially for you.
It’s not a 15 (or 25) year commitment - you can sell the house any time and use the money to pay off the mortgage.
But the price of the property can decrease, so it’s better considering an asset with a stable value over time (given the area, energetic efficiency, etc.).
Property is one of the most stable assets; even if there’s a crash you can still live there until it recovers.
Yup this was my thought. Either A) you locked in “Rent” for 15-20 years or you can sell it (usually at a profit) if you need to move or get rid of the property.
30 year mortgage at 52 and 1 heart attack… “The mortgage will outlive me!”
OTOH… locked in $2,000/mo. housing payment for 30 years… It’s already paying off as the rent on our old place is $2,300/mo. now.
Even if it was the same amount or a bit higher (or perhaps even a lot!), it would be better as you aren’t throwing the money away. Good job though, despite the health.
