Convince me to Not Buy a Home

[Tourmaline]

I am curious to why you are against a mortgage. You're paying the government for the right to "own" the property (property taxes). You're paying an insurance company for replacing anything that gets damaged (homeowners insurance). You pay the neighborhood for god-knows-what (homeowners association fees). That probably adds up to $500-$700 a month, anyways. So, is a mortgage really that bad?

The tax advantages for a mortgage are there (FYI I'm not a mortgage broker).
Mortgage Principal - not deductible
Mortgage Interest - Tax Deductible
Property Taxes - Tax Deductible (up to $10,000/yr)
Insurance - not deductible
HOA fees - not deductible
Rent - not tax deductible

On a 30-yr fixed mortgage you will pay more in interest in the first 15 years than principal. So, the tax advantage is there. Especially in the first few years.

Also, calculate how much money you have to make to pay your rent vs paying a mortgage.

Let's say your effective tax rate is 25%. So, when you make $100, $25 go to taxes and you keep $75.

Rent = $2,000 then you have to make $2,667 to pay your rent.

Mortgage = $2,000 (principal = $500, interest = $1,500 in the beginning with 30yr fixed)
then you have to make $667 to pa your principal and $1,500 to pay your interest
So, you have to make $2,167 to pay your $2,000 mortgage

The $2,167 you need to make to pay your mortgage compared to the $2,667 to pay your rent sounds like a better deal to me.

Then, if you add in the fact that the $500 principal goes into your equity, which is money you will get back if you sell it. Rent is money you will never get back.

A mortgage loan is setup as an advantageous tool. The tax advantages and the incredibly long financing term are impossible to find anywhere else. You can't borrow money to buy stocks or a business and have 30 years to pay it back at the lowest interest rate available amongst the entire consumer debt spectrum.

I never considered the tax advantages. That's not insignificant at all. It's even more significant if you have a higher tax rate too!

The only major downside to me is tying up so much capital instead of pumping it into business instead.

$50k down but 25% savings in living costs

vs

$50k making money but 25% increased living costs

 

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[Deleted74396]

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$50l fuxp cav 25% tewopht op mowoph dutvt

wt

$50l neloph nupiz cav 25% opdsietif mowoph dutvt

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[MaxKhalus]

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