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this post was submitted on 30 Jan 2024
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I was gonna do this, then my partner badgered me into it saying she wanted to buy a house someday, and my credit being crap would screw that up.
Your partner wants to finance a house someday. I know I'm on the losing side of this battle but I really wish people would stop associating BUYING a house with taking out a LOAN from a bank.
It just feels like people are only deceiving themselves by saying "I need good credit to buy a house" when what they really mean is "I need good credit so I can take on a lot of debt and pay out hundreds of thousands of dollars in interest over the next 30 years."
One way or the other, you're paying every month. Either it's rent (paying for the landlord's house, including taxes, insurance and interest), or you're paying towards your own. The general populous has never really been able to buy a house outright. One way or another you're mortgaging your time to spread out the time to either pay for a house, or pay for property and building your own.
Yes, people have been going WAY to far into debt, pushing the size and prices of houses to unsustainable levels. Hell my mom grew up just fine with 5ppl (2 parents, 3 kids) in an 800sqft house (plus a tiny finished attic) with 1 bathroom. Nobody really needs 2500-4000sqft houses.
But even if we go back to reasonably sized homes, in no realistic world are mortgages going away.
The best you can hope for is to live as cheaply as possible to save up a large down payment (and emergency fund), and buy only as much house as you really need, for as little interest as you can manage, and then pay it off as quickly as you can.
I'm not saying mortgages should completely go away. I'm sure a mortgage is the right decision for many people's situations. It's just the way that people talk about buying a house, a mortgage seems to be assumed. If it wasn't just assumed then maybe people would put more thought into whether they want to save for a larger down payment (or the full price) or whether they want to pay $750,000 for a $400,000 house.
I don't know, maybe people see these numbers and think its a great deal. All I see is a bank making a huge amount of money from me that I would rather keep for myself. Also, if people stopped stretching their budget to the absolute limit with financing nonsense (3% down, variable rate loans, rate buydowns), in aggregate there would be less demand for houses at these high prices and sellers would have to start accepting lower offers.
Sure beats paying rent ...
Yeah, I paid cash for my house at $60k.
Eh, I bought a house in 2020 just before the pandemic hit, and by the time I sold it late last year it had appreciated in value enough to completely offset the money I'd put into the mortgage. Essentially I'd lived there for 3.5 years for free.
Yes it sounds like everything worked out great for you. Good job on timing your investment! But this is a perfect example of the type of financialization of the housing market that I'm against. You used leverage to buy an expensive, risky asset and sold it for a profit just a few years later. This doesn't always work out so well (ask anyone who bought a house in 2007) and I don't want to put essentially all my savings into a wallstreetbets style gamble just so I can have somewhere to sleep at night.
I certainly don't think that the housing market is a wallstreetbets style gamble. If you're getting a loan that you can afford on a house that's not falling apart, it'll generally rise in value over time. The only reason my house didn't appreciate even more in value is because it was a cheap house in a bad neighborhood, and I did nothing to improve it while I was there. My sister's house doubled in value in a little over twice as long as I had mine, and she already paid off her mortgage in just 10 years, albeit due to near-fanatical saving and planning. Even through 2008 people's values usually went up if they managed to hold onto the house for a few years - it was a rocky time to be getting into or out of the market, but if you just stayed put, you made it out on top in the end.
I agree that it shouldn't be necessary to finance a purchase that's worth several times more than your annual salary, hoping that nothing too bad happens in the meantime before you can cash it out, but it's still the best investment your average low/middle class person has access to, and it's a hell of a lot better than spending a comparable amount of money on an apartment that you've got nothing to show for in the end.
How precious, your partner thinks housing will be affordable some day.
In 30 years they'll be able to afford a shack in the middle of the Texan wastelands once global warming desolates the place.