Homes/Home Ownership

[Live From China]

I guess I am looking for some information here.

I have heard quite a few contradictory views about home ownership:

(1) If you don't own a home by the time your 35, you are a loser!

(2) A home is one of the worst investments you can buy (based on the fact that you end up paying far more

than what it is worth; principle v. interest).

(3) Homes are moneypits. Homes are dream killers.

(4) You must have a home, otherwise, you are throwing your money away.

Etc., etc., etc.

I have been a co-owner of two homes. I enjoy having my own place (sometimes) but generally find homes and home ownership a pain in the ass. Homeowners can be boring, especially when all they do on weekends is mow their lawn. Funny thing, I enjoy building them. I have built one for someone else.

What do people think?

[JerrySeinfeld]

I guess I am looking for some information here.

I have heard quite a few contradictory views about home ownership:

.

Etc., etc., etc.

I have been a co-owner of two homes. I enjoy having my own place (sometimes) but generally find homes and home ownership a pain in the ass. Homeowners can be boring, especially when all they do on weekends is mow their lawn. Funny thing, I enjoy building them. I have built one for someone else.

What do people think?

Not really political, but I think owning a home is both a status and security thing for most people.

In true economic terms the own/rent decision shuold not be an emotional one, but it is for alot of people, especially women.

Talk to most married men. They'll probably say it doesn't matter to them whether they own or rent, but their wives really pushed for home ownership. Thats a pure guess, but anecdotally that's what I've seen.

As far as your points:

(1) If you don't own a home by the time your 35, you are a loser!

This has nothing to do with sound economic decision making and more to do with status (which is a big issue for alot of people).

(2) A home is one of the worst investments you can buy (based on the fact that you end up paying far more

I don't know about that - if you owned real estate in most parts of the continent over the past decade, you've done VERY well.

(3) Homes are moneypits. Homes are dream killers.

Yes. If looking to buy a home, factor in alot more in expenses than just the mortgage and taxes!!! I'd hate to be house poor: nice house and no life.

(4) You must have a home, otherwise, you are throwing your money away.

This has become almost religion as the housing market has risen. Depends where you are in the cycle. I'm sure many people who bought real estate in the US over the past 6 months would beg to differ. There has been upwadrs of 20% downward correction in many markets there. I'm sure many of the buyers from last year would LOVE to be renting right now.

[jester]

1--Why 35? Why not say 21? I didn't "own" my first home till I was 39, but then I didn't get married till I was 38 so had (ahem) better things to spend my spare cash on.

2--Hopefully the value of your home would increase as time goes by. My first home cost 135,000 and is worth over 460,000 now 10 years later, a lot more than my principle and interest.

3--Only if you buy badly and don't do all your maths right.

4--Depends what you do with it. A personal choice I know that mine was very well spent I mean invested........

As to the rest ,does it need doing every weekend-mine doesn't and I don't have someone else telling me how much to spend on it and where or when.........

[Renegade]

(1) If you don't own a home by the time your 35, you are a loser!

This is a POV from a judgementall dumbass. Homeownership is an individual choce and is right for some but not for others. Basing the criteria for ownership on age is an ignorant statement.

(2) A home is one of the worst investments you can buy (based on the fact that you end up paying far more than what it is worth; principle v. interest).

It may be. A home, from a financial POV is an investment. If you want to profit from your investment you must be selective about your choices. If you buy a home with unappealing attributes, and overpay, or buy at market peak, it may well be the worst investment you will ever have. Not just because of the principal and interest, but also because generally when you buy a home, you are leveraged, so that any declines in price are magnified.

(3) Homes are moneypits. Homes are dream killers.

Possibly. Depends upon what your dream is. If owning a home is your dream, its not a dreamkiller. No question that a home is a costly investment and may be a moneypit, however in most cases the money invested is recovered. There are always exceptions.

(4) You must have a home, otherwise, you are throwing your money away.

Most people need a place to live. If they didn't own, they woudl rent, so generally some allowance for expenses should be for accomodation. If you rent you accomodation expense is going to the landlord, if you own, the accomodation expense is going to the bank as interest payment and to the city as property taxes.

Whether you are "throwing your money away", depends upon a number of things:

Would you buy the same type of accomodation you would rent?

Are interest rates low? (Low interest rates favour home ownership)

What rate should I expect my house price to rise?

Am I prepared to bear the full cost of maintainance and repairs?

In a market of declining property prices, (such as what happened in toronto from 89-96) it is almost always better to rent.

[fellowtraveller]

1.

Unless I choose to live in a large refrigerator box under an overpass, I have to live somewhere.

2. I accept that either renting or owning, I will be paying a mortgage, either mine or my landlords.

3. At retirement, i want my monthly overhead to be as low as possible. Renting does not get me there, unless you believe the old kneeslapper that you can pay rent all your life plus set aside extra dough for retirement, then continue to pay rent off that investment.

4. I also like the opportunity to leverage my home equity quickly into liquidity for investment, when I run across those occasional great deals in real esate

[Remiel]

Personally, in my simplistic and not very well informed view of the matter, it should seem logical that it would be almost always be preferrable to buy. When you are done paying rent, you have nothing, when you are done paying the mortgage, you have something. Renting is a hole. Owning is an investement. Maybe not the greatest of investements, but better than throwing your money into a hole.

[Argus]

I think I paid over $200,000 in rent for an apartment for many years. At the end of that time I had - nothing.

When my fortunes rose, i looked for a better rental place, but i didn't find it. Large apartments seemed almost absent, unless you were a millionaire. The price of anything with any kind of style was way out of line with simply buying a place. And buying gives you many more choices, and generally much nicer places.

I grew up in row houses, rentals. They were clean, and functional, but they had no style, no extras. They weren't particularly cheap either. Now by comparison, a friend of mine bought a condo about two years back for $130k. She was paying less for a mortgage, plus insurance and taxes, then others were paying for rent. It's a stylish place, not big, but well laid-out, with a big stone fireplace. I never saw a place like that for rent at any kind of reasonable price.

When i bought my house, my mortgage was under $900. The rent started at about $1500 for an equivalent house. And that didn't include hydro or gas.

You do the math.

Yes, owning a house is more difficult. You can't just call the landlord when your stove dies, or your basement floods, or there's a problem with the toilet. On the other hand, you can alter the place to suit you. If you want to put in a second fireplace, put in pot lights, renovate the kitchen, you can do it yourself (provided you are handy or can find an honest, competent contractor). Overall, owning beats renting all to hell.

[Live From China]

Part of me really wants to by a home for all the advantages stated above. There are currently "forces" stopping me from doing that. It's a long story!

In a sense, I am "throwing away" money on rent, but on the other paying rent ensures my survival, which is what life is really about - I guess.

[RB]

It is better to own since you are seeking opinions. weighting the rental vs the mortgage why pay someone else's mortgage?

Treat it as an investment, and assets you are building ie if you can afford to tie up some of your funds.

Heck it is better to own a whole bunch of properties if you are a capitalist and seeking to invest wisely and to make some money - money has no emotional value its all logical and up to you how you sport it.

I mean there is something about working hard for what you earn to simply watch it slip through your fingers like that.

[geoffrey]

(1) If you don't own a home by the time your 35, you are a loser!

Ok, that's silly.

(2) A home is one of the worst investments you can buy (based on the fact that you end up paying far more

than what it is worth; principle v. interest).

Completely wrong. You've got to live somewhere. It's better to build equity with your monthly payment then to piss it away on someone else's mortgage. Buying a house is far better than renting. Banks make a killing off mortgages, no doubt, and you end up paying way more than it's ever worth. But realistically it's still much better than paying rent. Comparing home ownership to sleeping out on a beach, another story, but that's not really an option in Canada.

(3) Homes are moneypits. Homes are dream killers.

Can be. Depends on what you do with it. A home can save you a ton of money by securing much lower interest rates than us non-homeowners.

(4) You must have a home, otherwise, you are throwing your money away.

In comparison to paying rent, I agree.

I have been a co-owner of two homes. I enjoy having my own place (sometimes) but generally find homes and home ownership a pain in the ass. Homeowners can be boring, especially when all they do on weekends is mow their lawn.

That's a personality issue, not a home owning issue. I'm sure Paris Hilton owns a house, I doubt if she mows the lawn on Saturdays.

[jester]

Seems that the concensus is to buy then. I mean how many rental tenants are in Forbes...

[Liam]

I've rented and owned. Ownership is far superior< IMO. For one thing, you can do anything you want to your space (painting, wallpaper, hanging swings in your living room if that's your thing). Aside from that, I have never felt the same pride in or sense of connection to any rental than I have felt in my home -- even when I lived on the best block in Boston, immediately adjacent to the Ritz Carlton. The home I own is far more humble, but it's *mine* and I love it. An added benefit, here in the US anyhow, is that interest on your mortgage is tax deductible and you pay zero in taxes on the sale of your primary residence up to a certain value. Add the appreciation in value and having a major asset once the bills are paid, and it's a no-brainer as far as I'm concerned.

Don't let others tell you that you should own X by age Y.

[Live From China]

I will agree that ownership is better than renting.

Here is something related to homes that I just cannot "get my head around." I am quite fond of shows on HGTV. I like learning about renos, repairs, etc. What sometimes I don't get are the shows about buying homes. Specifically, someone wants to buy a new home because they are "running out of room." Usually that means junk, knick knacks, etc. They get a new home and then I will bet they fill it with even more stuff.

And then, surprise, surprise, 10 years later, the stuff ends up in the landfill (when I was younger, this used to be known as a garbage dump). This occurs after the stuff has spent 6 years in a box in a closet.

[White Doors]

you obviously have no Children.

[BC_chick]

(1) If you don't own a home by the time your 35, you are a loser!

(2) A home is one of the worst investments you can buy (based on the fact that you end up paying far more

than what it is worth; principle v. interest).

Re: 1) Even though I'm not a "loser" by that definition, I completely disagree. I'm not sure how people are swinging home-ownership these days if they are single, in a major city, and don't have help from another source.

Re: 2) I also disagree with this one. If you have a short-term mortgage, the interest is really low. And if you have a long-term mortgage (25 years), then consider how much prices have gone up in the last 25 years and based on the same projection then I'd say the chances are your house will be worth more than what you've ended up paying in interest.

Let's take worst-case scenario though and you end up paying more interest than the value of the house after 25 years... at least you still have a house which is yours as opposed to nothing to show for it when you pay rent.

3 and 4 are the same thing, worded differently.

[Live From China]

I'm not sure how people are swinging home-ownership these days if they are single, in a major city, and don't have help from another source.

I'll agree with that. I've given up any hope of owning a home (although it was never a huge drive for me anyway). A check of the MLS site shows utter dumps in Kamloops going for $250,000. I've heard people say,"We just saw a beautiful home at such-and-such a place," and when you drive by it is just a hovel that rats wouldn't live in.

[guyser]

I'll agree with that. I've given up any hope of owning a home (although it was never a huge drive for me anyway). A check of the MLS site shows utter dumps in Kamloops going for $250,000. I've heard people say,"We just saw a beautiful home at such-and-such a place," and when you drive by it is just a hovel that rats wouldn't live in.

Any family around ? Friends?

Buy it , reno it, put it back on the market in time for the spring. Take the cash and buy another home you want to live in.

Takes balls, but it can definitely be worth it

[Chuck U. Farlie]

Only you as an individual can decide if home ownership makes sense or not... depends what you need.

If you can live in a bachelor pad comfortably, and you can get one for $500 to $700 a month, then you probably won't be able to do much better than that, financially speaking...

I have been pondering my options as well lately, what I am looking at is this:

Option 1:

Buy a condo... in Toronto, it's hard to find a nice place (not at jane and finch) for less than $150000

for a mortgage amortized at 25 years at 6% thats $959.71 a month... which equals $287913 considering a set interest rate (which isn't realistic)... that is $287913 - $150000 = $137913 in interest, or $459.71 a month in interest. Most condos here have between $350 to $500 in maintenance fees, including all taxes and utilities.... So that's upwards of $800 to $1000 a month that is not going towards your principle and you will not see again unless property values go up amazingly high, and $500 a month going towards principle which hopefully you can recover plus some when you sell.

Option 2:

Buy a townhouse... cheapest I saw in GTA was $325000... mortgage same as above is $2079 a month... I can't afford that... it's not an option, especially if you include property taxes, utilities, etc..

Option 3:

Just rent a small bachelor apartment, utilities included for $500 to $700 a month, less furniture needed, can move easily if you don't like your neighbours...

Considering my lifestyle/family situation (none) I am best off living in a bachelor pad... buying a condo or townhouse makes no financial sense to me. Buying a place would make sense, however, if you had the cash... didn't need a mortgage.

[Wilber]

In 1966 my parents sold a house in Vancouver for $26,000. It was a nice big house on a large city lot in Point Grey and it took several months to sell. Tax assesments on lots alone are averaging around 1.2M this year. Not typical maybe but it shows what can happen.

Aside from the investment aspect, the more I see the more I believe it is important to own where you live, no matter how humble it may be. Every week it seems there are people being evicted from apartment buildings in this area because they are being renovated and sold as condos. People are told, come back in six months with a few hundred grand and maybe we will sell you back your place. Rental accomodation is getting harder and harder to find because there is less money to be made building rental property. No security in renting.

[jester]

After renting for many years I would buy as quick as you can. Rent pays someone elses mortgage, might as well get the benefit yourself.......

[margrace]

One of the reasons that immigrants used to come to this county is the ability to own their own land. This has always been the goal of any people I know. When you do not own where you live you are at the mercy of the big guys. We become the same as the Serfs of old.

[Chuck U. Farlie]

After renting for many years I would buy as quick as you can. Rent pays someone elses mortgage, might as well get the benefit yourself.......

The problem is, Jester, that if you buy a place using a large mortgage instead of money you have, then 48% of your money is going towards interest fees - not towards your principal, you may not want to pay someone else's mortgage, but why do you want to make the banks even richer? I would sooner rent a room in my sister's house and help her pay her debts than make more profits for some faceless corporation.

I was surprised when I calculated above that $459.71 of a $959.71 (48%!!!!) mortgage went to interest charges, and those calculations are based on a 6% interest rate! If anyone is wondering about my calculations, I went to pcfinancial.ca and used their mortgage calculator.... plugged in $150000

for a mortgage amortized at 25 years at 6% thats $959.71 a month... $959.71 x 12 x 25 equals $287913 considering a set interest rate (which isn't realistic)... that is $287913 - $150000 = $137913 in interest, or $459.71 a month in interest.

I plan to buy some day, but only when I have a lot of savings to pay off a significant amount of the principal as to lessen the amount I need to mortgage, and therefore lessen the amount of interest that I need to pay the bank. In the meantime I am going to live in shared accommodations (i.e. rent a room out of a house with others) or cheap bachelor pads so as to save money.

Wilber, it's too bad your parents didn't keep that place until now. Not all real estate makes money, although lately that is how it seems. It is just as possible that if you make a bad choice in location (i.e. Kirkland Lake, Ontario), you might not even be able to sell the place... no matter how much lower you go from your buying price. That is something these Albertans must consider when buying a place in an oil or mining town... what happens to the value of the real estate when the resource the town relies on for employment dries up?

[Live From China]

After renting for many years I would buy as quick as you can. Rent pays someone elses mortgage, might as well get the benefit yourself.......

What happens if you just don't have the money?

Another scenario (doesn't apply to me, but interesting):

That is something these Albertans must consider when buying a place in an oil or mining town... what happens to the value of the real estate when the resource the town relies on for employment dries up?

I remember Ft. McMurray when the boom died. A friend of mine who was teaching up there said people up there could not sell or rent their places out.

[geoffrey]

I remember Ft. McMurray when the boom died. A friend of mine who was teaching up there said people up there could not sell or rent their places out.

I'm sure whoever picked up those properties is now laughing their way to the bank though.

[jester]

I remember Ft. McMurray when the boom died. A friend of mine who was teaching up there said people up there could not sell or rent their places out.

True but then a house is a long term investment. I wouldn't buy in a boom unless you plan on staying after the boom goes bust.