At breakfast this morning, my brother reminded me of my original goal that I’ve stated publicly here on this blog before: to pay off all my debt… and then buy a house.
(Public blogs are GREAT for accountability, by the way.)
After that, he made an interesting observation.
“Buying a house is kind of like paying for the privilege of debt,” my brother said. “It’s like, ‘Hey, you give us $30,000 and we’ll let you have $370,000 of debt.’”
When you think of a mortgage as “paying for the privilege of debt,” it turns the whole thing on its head… and it makes renting seem more logical.
Sometimes, we’re so locked into our normal way of thinking, we need a completely new paradigm to get us to see more clearly.
I think my brother’s observation is one of those mind-shifting insights.
Seems to me, buying a house made a lot more sense back when people saved up 20% to 50% as a down payment… and only got a 10-year mortgage. In 10 years or less, you would actually own something.
Nowadays, actually owning a house — and I mean really owning it, as in there’s no more mortgage — is very uncommon. I’d guess that less than 10% of Americans actually own their homes. The overwhelming majority are just renting their homes from the bank.
Anyway, what do you think? Are my brother and I just being too extreme? Or is buying a house the equivalent of paying for the privilege of debt?
Leave a comment and let me know your thoughts.
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{ 3 comments }
I agree with that.
And when you factor in all the repairs and money spent on upkeep I don’t see how you come out ahead financially by renting vs. “owning.”
The only real advantage to renting your house from the bank vs. a landlord is that it’s harder to find decent rental property, especially when you have kids. For example, condos are always geared to singles or retired people, it seems. And if you manage to find a decent house to rent the rent is often more than what you’d pay for a mortgage.
I would still call it a Rent to Own deal. Think Rent a Center with better financing. I hope to live in my house for long time and don’t have problem with the rent to own deal. When I can retire, hopefully the house will be paid for. Then I my only rent will be insurance and taxes which will be much cheaper than actual rent.
The problem is people upgrade houses and never will see the day of not making that big rent payment.
@Anita – Having looked for rental properties (single family homes), I can say there are fewer good ones out there when compared to homes for sale.
If there was no inflation (meaning home prices were static), and home improvements were fairly rewarded, then it might make more sense to buy.
@Carl – I agree. People move far more often than they need to, or should. Then again, I’ve found it’s hard to find a place to live where there are decent, responsible neighbors.
Currently, I’m surrounded by irresponsible dog owners and smokers who throw their cigarette butts in the yard and the street. Ugh.
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