Mortgage is the way to go if you can have enough income to qualify for it and have the down payment.
This is simply not true in the general case, and stating something simplistic like this is a disservice to people’s financial literacy. The highest variable in this accounting isn’t even market dynamics, it’s the investment habits of the counterfactual renter.
There are situations in which buying is more appropriate than renting, due to personal circumstances and specific market conditions of where a person wants to live. But it’s not at all a clearcut decision without those specific conditions.
I agree in that scenario it would make sense to rent…but only for a time…eventually you have to retire and don’t want to be paying rent that has increased year over year. I.e. here rent can go up 3-4% y over year.
No, it’s not “only for a time”. Mortgage is leverage at a low rate, so as soon as it’s done, the cost of ownership for the home makes ownership worser in comparison to renting. The reason this isn’t obvious is that you’re not doing the comparison to the counterfactual renter investing the downpayment amount plus the cashflow surplus during the entire lifecycle of the mortgage.
There is no cash flow surplus in BC and Ontario though, housing market is too high, rent is way too high, that people spend majority of income on housing.
The person working and paying the amounts I quoted you is working to live. The old days of cheap rent where the metric make sense are gone out here.
So you’re saying that in BC and Ontario the monthly mortgage payment is lower than the cost of rent for a comparable unit? Maybe you misunderstood what I meant with cash flow because that’s wildly out of base. My rent is $1000 less than the monthly mortgage for the same unit
Not sure where you live but as I mentioned my friend pays $1200 for a room in a house. A another lady pays $2200 for a coach house above a garage. My place could rent for $3500 While a mortgage is way less.
Out here at least landlords charge way more than their mortgage coat plus maintenance because they are income properties and the scarcity.
My place could rent for $3500 While a mortgage is way less.
If you’re talking about a mortgage that was signed years ago, that’s definitely feasible. If you’re talking about a mortgage that would be starting right now, that would be abnormal. A property costing ~ 1MM starting on todays 4.5% rate means a monthly mortgage above 4.8k but will go for rent for about 3.7k
I think you may have cherry picked one where landlord wants to lose money? Landlords typically price the units so it is self supporting and covers all fees etc.
I had counter examples but figured its not worth the back and forth. Ive run the calculators and here the mortgage including fees ends up way less than rental over 25 year period, and at end of 25 years I stop paying a mortgage, and a renter keeps paying till they die. You mentioned a smart renter would invest, but honestly I couldn’t afford to live in this place if it was rental, it would be over half my income.
I’m better off owning and putting the difference from what it would rent for compared to my mortgage and fee, into an investment
This is simply not true in the general case, and stating something simplistic like this is a disservice to people’s financial literacy. The highest variable in this accounting isn’t even market dynamics, it’s the investment habits of the counterfactual renter.
There are situations in which buying is more appropriate than renting, due to personal circumstances and specific market conditions of where a person wants to live. But it’s not at all a clearcut decision without those specific conditions.
No, it’s not “only for a time”. Mortgage is leverage at a low rate, so as soon as it’s done, the cost of ownership for the home makes ownership worser in comparison to renting. The reason this isn’t obvious is that you’re not doing the comparison to the counterfactual renter investing the downpayment amount plus the cashflow surplus during the entire lifecycle of the mortgage.
There is no cash flow surplus in BC and Ontario though, housing market is too high, rent is way too high, that people spend majority of income on housing. The person working and paying the amounts I quoted you is working to live. The old days of cheap rent where the metric make sense are gone out here.
So you’re saying that in BC and Ontario the monthly mortgage payment is lower than the cost of rent for a comparable unit? Maybe you misunderstood what I meant with cash flow because that’s wildly out of base. My rent is $1000 less than the monthly mortgage for the same unit
Not sure where you live but as I mentioned my friend pays $1200 for a room in a house. A another lady pays $2200 for a coach house above a garage. My place could rent for $3500 While a mortgage is way less.
Out here at least landlords charge way more than their mortgage coat plus maintenance because they are income properties and the scarcity.
If you’re talking about a mortgage that was signed years ago, that’s definitely feasible. If you’re talking about a mortgage that would be starting right now, that would be abnormal. A property costing ~ 1MM starting on todays 4.5% rate means a monthly mortgage above 4.8k but will go for rent for about 3.7k
I think you may have cherry picked one where landlord wants to lose money? Landlords typically price the units so it is self supporting and covers all fees etc.
I had counter examples but figured its not worth the back and forth. Ive run the calculators and here the mortgage including fees ends up way less than rental over 25 year period, and at end of 25 years I stop paying a mortgage, and a renter keeps paying till they die. You mentioned a smart renter would invest, but honestly I couldn’t afford to live in this place if it was rental, it would be over half my income. I’m better off owning and putting the difference from what it would rent for compared to my mortgage and fee, into an investment
Sigh… yeah sure, let’s leave it at that.
Have a good week dude