Or the reason why it’s so much harder to get a mortgage now than it was 20 years ago.
15 years ago was 2009. Incredibly difficult to get a loan during the mortgage melt down. They finally started loosening about 2012. Could say 08 to 12 was back to the days you needed 20% plus to be considered for a loan. And even then some banks just weren't lending.
My bad on the math. I obviously meant pre 2007. I’m just an idiot.
Ah, we all f up. 04 to 07, yes, was probably the easiest time to get a loan. Liar loans were a thing. Many of us back then were (supposedly by law) to be watch dogs. We're saying it was unsustainable.
While now with the waivers and no asset verification process. Seems there may be an issue starting up again.
I just realized 15 years ago was in the 2000s and this made me sad
That song about "she's still preoccupied with 1985" is chronologically closer to 1985 than it is to today
Yes and some lenders were doing stupid shit too ….. putting folks in homes that they reasonably couldn’t afford by creating a “interest payment only note”, or graduated payments etc. They were doomed for failure after the passing of the Dodd-Frank Bill.
Not completely true. If a person had good credit loans were not very difficult to get with 10 percent down. I'll add that the government back then was giving qualified first time home buyers 10 percent of the purchase price up to $ 8,000 which essentially created a potential zero down payment situation for those who qualified
Fun fact: After the mortgage crisis and Freddie Mac and Fannie Mae in the US basically going into receivership the basic problem was that those two entries had significant restrictions placed on the terms of mortgages they could purchase until they could be stabilized.
In 2008 the Obama Administration had scheduled a roll back of those restrictions which would have made it easier for lower income people to get mortgages—not as easy as before the crisis but much easier than in the aftermath.
The very first executive order, the very, very, very first one signed within hours of taking the oath of office, signed by Donald Trump was to stop these rollbacks from going through.
It’s like a guy whose only absolutely reliable stream of cash flow was apartment rental income thought he should do something that was good for large landlords at the expense of folks that wanted to own a home.
Not for nothing, after Trump spent a lot of effort courting the American Home Builders Association in the 2016 election, this was also a huge slap in the face for builders of affordable housing.
He signed those to keep the meltdown from happing again.
15 yrs+ ago when govt mafia tactics ("Be a shame to see your biz under all that Fed. scrutiny w/ numerous, unannounced agent/auditor visits, nitpicking every 'violation' they can make up, I mean find, if these loans weren't available to 'the poors'") == handing out loans to everyone, knowing they COULDN'T pay back, let alone make monthly payments on the regular??
Are you illiterate? wtf did you just try to say?
Federal government was coercing banks into taking substandard loans.
Opposition = \ = ignorance. It is possible to be fundamentally ideologically opposed to the current corporate system while also understanding how it "works".
Yes, but OP's post provides a logical sequence that isn't sound.
Being able to pay $1,000/month rent in the short term where the landlord has relatively little risk given they can evict you and rent to someone else.....
Doesn't indicate you can pay a $500/month mortgage for the next 30 years where the bank has a relatively high risk of losing the capital lent to you when you stop paying.
In this case, the opposition does equal ignorance since OP believes in a flawed logic that being able to afford $1,000 rent short term automatically means you can afford a $500 mortgage long-term.
I could easily twist that the other way: support for this system is ignorance because it ignores externalities like homelessness. Someone who can afford $1000 a month in rent getting a $500 a month mortgage sounds way preferable to not getting the mortgage and the landlord eventually raising rent, evicting the tenant and making them homeless.
See why calling your opponents "ignorant" is a shitty debate tactic?
no - because you're talking about it from the perspective of the tenant. Decisions are made by the landlords and banks. Therefore only their reasoning has value.
You not understanding that is the basis of your ignorance. The world doesn't revolve around you. If you want to use someone else's capital or live in someone else's property, you have to consider THEIR needs, not yours.
That’s correct. It’s none of a renters business what risk a landlord has or what financial backing they have. It’s not your business. You are not family, you are not responsible for them in anyway.
Therefore only their reasoning has value.
Tell me you're a corporate shills without saying it lmao.
"Anyone who disagrees with my perspective doesn't have value".
You not understanding that is the basis of your ignorance.
Nope, again, these are opposing world views. I care about the entire dynamic, not just a small selfish portion of it. You are incredibly bad at debating seeing that you don't seem to have anything other than calling your opponents "ignorant". Do better.
really?
my contention: if you're going to use/borrow else's property, you must do it on their terms.
your response: what a corporate shill. you're bad at debating.
i've responded to everything you've claimed. Your only two responses so far is "being off topic" and "you're bad at debating". oh the irony.
i've responded to everything you've claimed.
You haven't responded to anything... Rather you doubled down on ignoring externalities and the broader effect on society.
Homelessness, businesses having a local work force available, etc all need to be considered in this. We don't live in some one dimensional world where only the profit of banks and landlords matter.
The profit of the banks and landlords matter.... To the banks and landlords. That's the point. They are the ones extending credit. If they don't think you can afford 30 years of a loan, then they won't lend it to you.
And considering they just got sorted from the last crash, it makes sense they might have some rules about what the requirements are before they will lend. 30 years is a lot longer than 1.
As opposed to the hypothetical system you support where people will just loan you lots of money without any sort of collateral?
Nope: a system where predatory zoning laws don't exist. A system where social housing is prioritized. A system where urban land isn't wasted by polluting and inefficient freeways.
The OP was trying to compare her ability to afford a mortgage with her ability to afford rent, which clearly she has the ability to make the monthly mortgage payments.
What she misses is that the down payment is not there to reassure the lender of her worthiness. She got that wrong. It reduces risks for the them, but it is unrelated to her. In lieu of a 20% deposit + closing costs, she would need a partial deposit + PMI + closing costs, or she would need some other type of significant collateral.
What she gets right is that we have reached a time where rents are so high, cost of living is so high relative to incomes, and housing inflation is going up so fast that it has become impossible for many to save fast enough to secure a down payment. This creates the paradox of paying more for rent than it would cost to own, but being unable to own because of the high cost of rent. She nailed that part.
We are in a period of hyper-inflation. We’re dumb enough to follow Venezuela into the rabbit hole.
All due respect, we are in a period of high inflation but not hyperinflation.
Hyperinflation inflation is typically defined a period of time where (1) the prices of all goods and services rise uncontrollably at a high rate for a defined period of time, and (2) the actual rate is accelerating over more than a short time.
One rule of thumb to define the difference between high rising inflation and hyper inflation is that the monthly rate of inflation is accelerating at more than 5% per month.
Example: Starting at a 0.2 monthly rate (2.4 annualized rate) you go from 0.2 one month, to 0.3 the next, to 0.45 the next, to 0.675 (8.1 annualized rate) the next and so on (each months rate multiplied by 1.5).
Most economists would not include a short burst in inflation following a short burst of deflation (like after a pandemic) as hyperinflation as long as the inflation rate starts dropping (starts decelerating)
High inflation really sucks.
Sustained higher than average inflation also really sucks.
Hyperinflation really, really, really, really sucks.
Don’t vote blue!
I seriously had people compare owning a car to cab rides, they really think all there is to it, is the $20. It cost more than $20 to get a license.
I'm not sure of the point of their comparison. Maybe they are saying renting an Uber might be on average around $20 trip, which may be similar to the cost to buy per trip when all costs are included (car, taxes, license, gas, maintenance/repairs, insurance), but generally, for the average person, buying is cheaper than renting, which is why people do it. If we think about the cost of a hotel or AirBnB, think about the cost of renting a car, think about the cost of renting equipment, think about the cost of a cab ride per mile, etc. If renting was cheaper as a standard then not only would people rent more than buy, but businesses and individuals wouldn't make a profit who loan their house, hotel room, equipment, or who perform a service like driving someone in their car; eg. renting a house for a year is cheaper than renting AirBnBs on day rates.
Renting a home for a lifetime is typically more expensive than buying, even when including taxes, insurance, cost of repairs/maintenance, etc. The cost to rent is cheaper in the beginning, and it is more flexible, but over one's life, the cost to rent gets more and more expensive as rents go up, and owning a home gets progressively cheaper over time with inflation/rising wages and especially once the mortgage is paid off in fifteen to thirty years, and of course, we would need to include the rising value/inflation of the home/land.
Because of the depreciating cost to own, and because of the need for landlords to incentivize people to rent, rents are typically cheaper than a comparable new mortgage on an apples-to-apples basis.
For the OP, the cost of the mortgage could be cheaper than renting because the OP is downgrading in size/quality/location, moving from a city apartment to a suburban/rural house, etc.
Some people are inexperienced, they think money is value.
Finance bottom feeders located.
I don't. Explain it to me.
Is it bullshit? There’s a big difference between making rent and commiting to 30 years making rent while also managing expenses of the house itself.
Idk how property taxes and additional expenses work in the UK, but at least in the US it adds a lot. You really need to factor it in to your monthly payment, all while adding the cost of any repairs or improvements. At least for my house, the mortgage is one of the lower expenses compared to the rest
The mortgage is one of the lower expenses compared to what?? As a home owner for 10 years I have had a handful of months where the expenses outweighed the mortgage. Most of the time it isn’t even close.
This is my situation too. It has been much cheaper to own a home and having the home has allowed me opportunities by: getting enough sleep because neighbors aren't right next to me, having plenty of space, being allowed pets which is extremely important to my mental health, having freedom with what I can do with my space. The list goes on.
The mortgage is cheaper than the taxes, for one. Granted those are quarterly. It's an old house and I haven't lived here long, a lot of stuff needs updating and not just cosmetically. It'll more or less even out in time but at the moment the mortgage is the easy part
For example, in the first month I had to get the furnace fixed, brand new dishwasher, update the wiring in the original part of the house. Next month I need to get insulation blown in the original parts of the house, replace some fixtures that aren't working, and redo parts of the kitchen because it isn't very functional as it is. Like I said, overtime it'll change but my first year here is proving to be pricy
I think people are pointing out the ridiculousness of you comparing major purchases for the house with the mortgage cost.
Furnaces last 20 years. Dishwashers can last 10+ years. Wiring upgrades probably don't even need to be done ever unless you are making other changes requiring more electric. Insulation is also once in a lifetime typically.
Most of those things you don't need to do right away either.
Literally all I said was, looking at my budget month to month, the mortgage cost is less money out of my pocket
My property taxes and HOA fees are more than the mortgage payment. That does not include repairs and maintenance. And that's on a 15 year loan because I refied a while back.
Just because the mortgage payment is lower than the rent does not mean you can afford to buy the place. If you can't save money for a down payment, why would a bank want to take a thirty year risk on you not being able to make repairs or do maintenance? You haven't shown that you know how to handle a budget. That landlord is only hoping that morning blows up in their face for a year. The bank has to risk a third of your life.
There's council tax in the UK which is similar to property tax but is worked out in a ridiculous way and varies significantly depending where you live in the country.
That actually doesn't sound that different.
It also tends to be higher in poorer areas, because those councils have to provide more services.
IIRC, the lowest is Westminster (Central London) and the highest is Blaenau Gwent (deprived Welsh Valleys)
US property tax calculations and laws differ from state to state. Calculations taxing districts change from county to county and city to city.
The county I live in there are 121 different taxing districts and 241 tax code areas. That's one county of 39 in the state.
So what is a “taxing district” or a “tax code area? Are they like special districts? Or are they just municipalities?
Taxing district in this state are a location where a governmental agency has the right to levy property taxes. Doesn't have to be a state, city, or county elected body. Most think in terms of school districts. But, there are others such as parks, police, fire, medic, flood control, or wildlife to name a few.
Oh, ok. So a “special district”. Terms probably vary.
Those things always seem inefficient and archaic to me. Like wouldn’t be more efficient to tax based on municipalities or county? If you want single purpose district just make it for the entire county or something.
In my state the county adds it all up and collects it for all the places that get property tax, so you only have one bill. But if you want to see where it's going you can look up how much goes to whom.
Yeah, that’s what my state does. But, if counties can do that why don’t they just make the districts county-wide? Just centralize special districts operations with the county. That would make public services so much more efficient and far better funded. People would also be far more aware of operations of one big agency than several dozen agencies.
Our taxes are now higher than our mortgage.
That’s a great problem to have
The OP was trying to compare her ability to afford a mortgage with her ability to afford rent, which clearly she has the ability to make the monthly mortgage payments.
What she misses is that the down payment is not there to reassure the lender of her worthiness. She got that wrong. It reduces risks for the them, but it is unrelated to her. In lieu of a 20% deposit + closing costs, she would need a partial deposit + PMI + closing costs, or she would need some other type of significant collateral.
What she gets right is that we have reached a time where rents are so high, cost of living is so high relative to incomes, and housing inflation is going up so fast that it has become impossible for many to save fast enough to secure a down payment. This creates the paradox of paying more for rent than it would cost to own, but being unable to own because of the high cost of rent. She nailed that part.
Eh, I've been saving a LOT more money now that I have my house. I've even recently replaced my furnace and got some roof work done. Still able to save more than when I was renting.
Not only expenses such as taxes, but repairs and replacing things like a roof, hot water, furnace asap as soon as it needs to...plus insurance etc....so that 1000 a month probably 100 going to insurance, 100 is going to taxes, 100 is gonna be saved up for that 5000 roof, and siding ..100 is going to be saved to repair replace carpets and due painting after you leave in couple years...100 is going to be saved or used to pay down payments or used to basically make a profit on your time...managing the unit.....getting repaired done, possibly giving access to plumber or electrical to get something fixed the renter needs...etc...
Wait until she sees how much it costs to replace a roof, furnace, water heater, etc...
The best part of homeownership is that everything is your problem!
Homeowner myself, here. While those things are indeed expensive, I always roll my eyes when homeowners act like it’s this horrendous burden.
Does it suck when something breaks? Sure.
It’s still 1000x cheaper than blowing money on sky-high, inflated rent.
How do I know this? Because the homeowners are STILL home-owning instead of renting which is supposedly such an amazing, care-free experience 🙄
It's not horrendous as you say, but in so many of these posts you get I pay 1500 in rent I think I can afford 1500 mortgage and completely gloss over everything else. Not to mention closing costs are insane and out you in a little.hole right away
Everything is your problem when you rent too. Landlords aren't running charities. You must think we are all stupid.
My house is no where near as expensive as rent and I did indeed just replace the roof.
What? Where do you live where any basic house maintenance isnt by law a landlord problem?
I believe the assumption is that the landlord has baked those costs into the rent.
They are but you're only paying it partially. As in the cost is baked into rent spread out over 10-15 years to cover the replacement. If, for example, the roof needs to be replaced the month after you've moved in, then you're still only paying your rent fee, not the 10-15k.
You have years worth of savings to plan for that. You really dont think you end up paying for that as a renter too? Its all baked into the rent with a bit more to ensure the property owner profits.
All three just happened to me in the last 6 months. Hurts man.
Stuff worth doing is hard a lot of the time
The OP was trying to compare her ability to afford a mortgage with her ability to afford rent, which clearly she has the ability to make the monthly mortgage payments.
What she misses is that the down payment is not there to reassure the lender of her worthiness. She got that wrong. It reduces risks for the them, but it is unrelated to her. In lieu of a 20% deposit + closing costs, she would need a partial deposit + PMI + closing costs, or she would need some other type of significant collateral.
What she gets right is that we have reached a time where rents are so high, cost of living is so high relative to incomes, and housing inflation is going up so fast that it has become impossible for many to save fast enough to secure a down payment. This creates the paradox of paying more for rent than it would cost to own, but being unable to own because of the high cost of rent. She nailed that part.
I see it in my family. We bought in 2009 for 25% of the previous purchase price. One guy in the family started having kids in 2014. He lived with us in 2013. I told him to save for a house, we didnt charge him. Makes great money, spends it all. He ended up moving out, renting and buying cars that cost what our house did. Just now looking at houses. Things have changed so much that hes going to have to put down about what our house cost. Yearly payments will be about what our house cost. Payments 5 times ours. We have house flippers, realtors, financial analysts in the family he could have talked to.
Yeah, and other times things are so hard it’s not worth it.
Why's it bullshit? One is a 15 or 30 year contract, one is a year.
One contract is a year because the landlord wants to raise the rent 15 or 30 times over 15 or 30 years. One contract is 15 or 30 years because the buyer can't pay it off in one year, or it would be a one year contract. Different things for different reasons. The landlord can do a 15 or 30 year contract at a fixed amount or fixed rate, no different than a bank, and it wouldn't change their risks, outside of not being able to evict a paying tenant to be able to liquidate that asset. Both have risks that have nothing to do with the length of the contract.
The bank wants 20%+ or PMI to cover their risks, so they can liquidate the asset in a down market in the event that the buyer defaults, which is where the OP is conflating the situation. Banks don't ask for $25k down to be "reassured" that someone is not a risk for them. Everyone is a risk, to one extent or another. Some more than others because of their financial stability or instability. They want the $25k to cover to cover their investment and reduce their risks.
To the OP, they can use their payment history of renting to improve their credit score to show consistency in making payments, but if I was a bank, this would do far less to protect my risks than getting a $25k down payment. The fact that someone could have saved $25k if they weren't over-leveraged on their rent doesn't change my risk as a lender. It can show that someone should be able to afford the mortgage, but I don't need their rental history to prove that. I have their income, their credit report and debt-to-income to determine that.
If you want to prepay 15 or 30 years, I know several landlords that will take you up on that....
Weird comment. I think you misunderstood/misinterpreted what I said, so I'll restate again. Like a mortgage that is say 5% for 30 years where the mortgage payment is the fixed/same amount over 30 years, a landlord can write a lease for 30 years at a fixed amount (below or above or at the cost of the original mortgage or given price), or they can write a lease for a fixed rate ($500/month x 30 years with a 3% increase per year), or they can write a variable rate ($500/month x 30 years with a change in rate subject to the rate of inflation/deflation). Most leases are one year for flexibility, but are equivalent to a variable rate mortgage in volatility, often changing each year based on the market.
We don't see long contracts too often. We do on commercial properties, and we could have a landlord and tenant agree to a 2, 5, 10, 30 year term, if the two parties so choose, but this is rare. Unless the law forbids it for residential properties, we don't see too many long contracts being established because the one year contract seems to be good for owners and renters to allow for flexibility.
The OP is trying to make the point that she is paying rent at double the amount of the mortgage, and she will need to do that forever (and the costs will go up), yet she can't qualify for a mortgage that she could clearly afford. She can't qualify because she doesn't have the ability to save for a down payment. She could pay a mortgage, no problem, but she can't save while paying for expensive rents in a market with a large "rental premium". In essence, she is stuck. She could qualify for a 30 year mortgage. That part isn't the problem. She has the credit worthiness and income. She just lacks the downpayment. It has nothing to do with 15 vs 30 vs 1 year contracts.
So you agree, they're not analogous.
Nothing you said was relevant to the OP's post.
The OP was trying to compare her ability to afford a mortgage with her ability to afford rent, which clearly she has the ability to make the monthly mortgage payments.
What she misses is that the down payment is not there to reassure the lender of her worthiness. She got that wrong. It reduces risks for the them, but it is unrelated to her. In lieu of a 20% deposit + closing costs, she would need a partial deposit + PMI + closing costs, or she would need some other type of significant collateral.
What she gets right is that we have reached a time where rents are so high, cost of living is so high relative to incomes, and housing inflation is going up so fast that it has become impossible for many to save fast enough to secure a down payment. This creates the paradox of paying more for rent than it would cost to own, but being unable to own because of the high cost of rent. She nailed that part.
It was exactly relevant - theyre trying to equate renting to ownership, they're not analogous. Completely disparate topics.
No, she is trying to equate her ability to pay a mortgage with her ability to pay rent. Entirely related topics and a necessary calculation for renters to do to determine if they can afford to buy.
And going back to your original post, what does the contract length of a typical mortgage compared to the contract length of a typical rental have anything to do with what the OP said?
It's showing how unrelated they are - you are making my point....
No it doesn't. Asserting I am doesn't make it true. You haven't made any valid argument, only baseless assertions.
The risks are entirely different.
For an apartment, you're talking about a one-year contract. If you at some point breach that contract, you'll be evicted and the owner can rent the apartment to someone else. There are costs involved with lost revenue and maybe some cleaning, but far less risk than a house.
With a house, you have a 30-year commitment. If you default, the bank takes possession of the property and now has to sell it. And there is a significant risk that the bank will lose money on the sale, especially once you consider (1) it takes longer to sell and close on a house than renting an apartment, and (2) the expense of selling a house is substantially higher. That's why PMI is a thing.
But all that aside, not sure where you can get a mortgage for 500 but rent for 1,000? What kind of nonsense is that?
Those numbers are based on someone who's never rented or had a mortgage and think they are reasonable
Seriously. Renting is just cheaper where I live. Not to say that buying a house is bad value, but this post is foreign to me.
These are not normal times. The real estate market is in a bubble rn due for a correction. Typically buying is cheaper than renting, but not like half as much as in the post.
Its wild in my area right now
Yeah, my mortgage is 1600 a month and that is way cheaper than rent. But, I have to pay my impound account 2200 a month to cover insurance and my property taxes. Rent where I live for a similar, but updated interior is 2800 a month on the upper end. I’m also paying monthly on a loan for a new AC because my last one died after 16 years and I live in a desert that hits 115 degrees or more in the summer. So I can’t live without it. I’m happy owning over renting, but it’s not cheap. Also, biggest problem that I didn’t anticipate was losing the mobility to move closer to job opportunities.
The OP was trying to compare her ability to afford a mortgage with her ability to afford rent, which clearly she has the ability to make the monthly mortgage payments.
What she misses is that the down payment is not there to reassure the lender of her worthiness. She got that wrong. It reduces risks for the them, but it is unrelated to her. In lieu of a 20% deposit + closing costs, she would need a partial deposit + PMI + closing costs, or she would need some other type of significant collateral.
What she gets right is that we have reached a time where rents are so high, cost of living is so high relative to incomes, and housing inflation is going up so fast that it has become impossible for many to save fast enough to secure a down payment. This creates the paradox of paying more for rent than it would cost to own, but being unable to own because of the high cost of rent. She nailed that part.
The risks ARE entirely different. One side has a home. One side has dollars.
If the person goes without a home, they risk DYING from exposure to the elements (ever been homeless in 104 degrees?)
If the bank goes without a mortgage payment, they risk a slightly smaller number on their earnings report.
One of these things is way more important to American lawmakers, and its evident in the finance-guru replies on this thread.
In 2024 there have been 54 cold-weather related deaths, and 22 hot-weather related deaths.
That's an "acceptably low number" in terms of business ops. But its an outright moral failing of the country that allows it to happen.
People seem to lose sight of the fact that banks *WANT* to lend money because that's how they make their profits.
So if they refuse to lend you money, they must really think you won't be able to pay back the loan.
Not to mention that banks will typically approve you for quite a bit more than you can actually afford. So if the bank is straight up denying you the loan, then you REALLY can’t afford it.
Yes!
it's a lot easier to kick a tenant out of your property and get a new tenant than to forclose on a house and sell it again. the risk isn't the same.
We made it too easy to get a mortgage in the leadup to 08. It turned out to be a bad idea.
I hate to say this out loud but
Enlisting has some very attractive benefits.
You don't need to do any more than 2 years.
GI Bill VA loans Small VA medical benefits Burial benefits
This list goes on and on.
2 years. Go in as a nonrate. 2 years. That's all it takes. Don't let them upsell you. You may even get to go somewhere cool that you may not otherwise ever get to go to.
VA home loans wipe this problem out. 0 down, and as long as you've kept your credit clean, guaranteed lowest interest rates out there with zero points.
And this benefit extends throughout the rest of your life.
No I ain't no recruiter, but I am speaking from experience.I dont know how the UK works but this is just the truth in the USA
What if you die?
Then it's no longer a problem
Very good question. But in response, let me pose a rhetorical question back: what if you get hit by a bus tomorrow?
What if gravity fails, and we all go flying off the earth?
And who said anything about enlisting into the army.... There are 4 branches of the service, 5 if you count the coast guard.
What about 6 if you include the space force.
No one counts the space force 😔
They don't charge rent in heaven.
What about hell ? Asking for a friend
I bet they charge rent there.
this right here
You can also save a lot of money in the bricks and make a lot of money. Could get out after two years with 12k-24k more
A cousin used his VA loan on a house right before everything went up. He moved some walls, did some drywalling. It's incredible and he did it fairly quickly. Truly amazing
... no
Lol that’s not why you make a down payment.
it's more expensive to lease a car than to buy a car, do you whine about that too?
No where in my state is the monthly payment less than rent. Moot point at the moment
User deleted comment
14d
you seem like a very pleasant person and i bet people enjoy your company
It’s not bullshit, it’s not your money, you don’t get to make the rules.
if saving up 25k at a good point in your life sounds impossible to you theres probably a good reason why a bank wouldnt commit to lending out 10-20x that amount
What? I can’t take out a 100k loan with .25 in my bank account?? /s
It’s more like rent is $1500, mortgage + taxes would be $2,500 on top of down payment right now.
Oh man, I wish I lived where you live.
Here mortgage and property taxes is $1800, rent is $3600 (using my friend's investment property as an example. He rents it out for mad profit)
How does that make business sense for the home owner renting out their home?, why make renting costlier than owning the house?, tell me they don’t get enough tenants, I’d be delighted if I am proved wrong.
It makes business sense for the home owner because the tenant pays for the home and the cost of upkeep. For the low price of the downpayment, and the assumption of risk (if the tenant is delinquint or destroys the property) the landlord is gifted a million dollar asset with no effort required (most people here use property management companies).
Renting has only been allowed to get so high because the renters who want to buy a home can't compete with all the companies and investors in the area. It has meant exponential growth of home costs of course. Everyone wants an investment that someone else buys for you.
Do you know what it means to be underwater on a loan?
Even with real estate, there is a margin between the value of the property and the value of the loan. A down payment is a form of collateral that helps maintain the margin.
Even if the house is new construction, your expenses are going to be much higher than when you rented.
I’m not justifying the criteria for getting into the debt a mortgage represents.
I’m reporting my personal experience.
My friend bought a house and found lots of insect damage the previous owner failed to disclose. He and his wife had put all their savings into the down payment.
He had to put a large amount for repairs onto a credit card.
I appreciated his sharing the experience and was careful to hold cash savings aside, when I bought my house.
Luckily in the US we have FHA loans.
And USDA loans. And VA loans. Lots of ways to get low down payments (although the VA loan requires more sacrifice than the others)
God damn. Those posts suck. This is not BS, it makes perfect sense if you know anything about LTV ratios or any type of risk.
Look what happened when we made it really easy for everyone to get a mortgage back in 2008. How did that turn out.
"We" didn't make it easier. Greedy lenders made it easier, and the rest of us suffered for it.
Why don't you lend out your money to people looking to get a home? I bet you'd get very selective very quickly.
Rent is the most you'll pay per month. Mortgage is the least you'll pay. Banks want to know you can cover repairs and maintenance for the next 30 years to protect their investment. Landlords only need to know you'll be able to pay for the next year.
You’d feel differently if you were the one lending your hard earned dollars to a person you don’t even know.
You can buy a house with a mortgage of only £500 a month in the UK???
There are lots of great comments here so I will offer a couple of thoughts. It is significantly more risky to lend to someone with a paycheck to paycheck mind set than someone that wants to build an emergency or savings fund. That said the 20% will also eliminate the monthly PMI insurance charge and apply more of your payments to principal reduction.
And don’t forget about them charging you each month for their mortgage insurance.
Not getting into policy here but more the reality of it no you cannot afford a mortgage just because you have been making rent. You. Personally, you. Now have to make all repairs and upkeep. Most people aren't capable of this and need to understand just how expensive that really is.
Rent and Mortgage are not the same thing.
Rent covers most of your housing costs. A Mortgage is only the beginning
Principal, interest, taxes, and insurance. Then property requires maintenance, repairs which averages 1% of property value, but could easily be thousands of dollars in one sitting. Then you have to find good vendors.
As a renter, ask yourself if you want to be the super, the property manager, sanitation, and emergency response team with the liquid funds to protect your investment.
Owning always nets a higher benefit than renting and every study ever done on the subject has confirmed this so it's a fully settled question.
There's no scenario where you are giving cost + landlord profit will benefit you in the long term. Homes will continue to increase in value because every facet of society is locked in unison to ensure it does. We're millions of homes short of population growth and all signs indicate that trend will only continue. There's no denying the reality of supply vs demand.
Single family homes are a liability.
Loan 25k elsewhere
I pay significantly more to own than to rent.
But there's a relative end in sight when owning compared to renting.
A one year commitment is very different from a 10, 15, or 30 year commitment.
It is quite likely the bank is more interested in servicing your landlord as a customer since they likely have several hundred just like you supporting them monthly and have far more cash than you do, thus it is a conflict of their interests to broker you a loan as an individual who has to work for income.
The same applies to a worker who wants to start a business.
The bank is only interested in increasing their deposits and interests.
Everyone take a look at the date it was posted.
USA here... You need 1: Stable employment of 2+ years 2: Credit Score of 700+ 3: A bank account in good standing to get an approval letter from 4: First Time home buyers can apply for FHA grants that help with down payments.
These are the steps I took 5 years ago when I needed to get away from renting.
It’s not bullshit at all.
Aren’t all mortgages in the UK variable rate? I think the 30 year fixed is pretty unique to the US.
You know what is more frustrating? When you go to refinance a mortgage and it is going to lower your payment by 40 and 3 years.
And they tell you you are too high risk.
We went with another company, who literally called them idiots.
You qualify or you dont, they dont care about your rent. The fact OP doesnt understand that is all you need to know.
Brooooo. Where are mortgages 500 pounds a month... that's like, cheap!?
There's a pretty big risk difference between paying an amount of money for one year vs paying that amount for 30 years consistently while also covering property taxes and maintenance expenses.
Also for some reason after 2008 we decided to start being really careful about who we give mortgages to.
Don't forget the fact that if you don't manage to pay them back for the house, they just take back the house and lose nothing...
Leases (or rent agreements) are either monthly or yearly. So the homeowner just needs reassurance that you can pay for one month or one year. In contrast, a home mortgage can last 30 years. Put yourself in the shoes of the person who is lending up to a million dollars for your house. They definitely need enough reassurance that you will continue to pay for 30 years and repay all of the money. Plus, if you research what happened during the 2006 housing market collapse, you would learn that it was a very hard lesson for mortgage lenders. Those who collapsed were the ones who were too eager to give out loans to people who weren’t ready to repay them (subprime loans). So, you should atleast be happy that there is someone willing to allow you to own a home early enough rather than having to save up for 20 years to finally buy a home.
I pay some stranger $1000 a month. Please give me $500,000.
Just watch the movie “The Big Short (2015)”, you will understand why that’s a very bad idea. Banks and money lenders have had a very bad burn and a huge scar reminding them of what not to do. So I am pretty sure they will not give out more of the subprime loans.
Not everyone should buy a house, renting is fine as well. You can use the difference to invest. Depends on the market of course. God bless.
Hahaha, it’s like you just became an adult this year
The OP was trying to compare her ability to afford a mortgage with her ability to afford rent, which clearly she has the ability to make the monthly mortgage payments. Qualifying for a mortgage for $500 is easier than qualifying for a rent for $1000 unless a landlord doesn't care to check. Both applications require proof of employment and income, credit checks, and debt-to-income ratios. The difference is the up front costs: renters typically have to pay first and last month rent and/or a deposit, where someone taking out a mortgage will need to pay for closing costs on top of 3.5%-20% down, which is typically significantly more expensive.
What she misses is that the down payment is not there to reassure the lender of her worthiness. She got that wrong. It reduces risks for the them, but it is unrelated to her. In lieu of a 20% deposit + closing costs, she would need a partial deposit + PMI + closing costs, or she would need some other type of significant collateral.
What she gets right is that we have reached a time where rents are so high, cost of living is so high relative to incomes, and housing inflation is going up so fast that it has become impossible for many to save at all or fast enough to secure a down payment. This creates the paradox of paying more for rent than it would cost to own, but being unable to own because of the high cost of rent. She nailed that part.
Yes, the people taking a financial risk to help you live beyond your means are the bad guys.
It’s more so about the 30 year commitment of installments the lender is worried about. 40% of the populace simply doesn’t have the stability factors, or track record to prove they will be able to maintain the contract, as-is. Real Estate default will sink a bank faster than any other activity or investment they can make.
Enough people fail to follow through that it's reasonable for anyone to be skeptical.
The person taking on the risk is the one who gets to decide what's reasonable for them. Beggers can't be choosers.
I literally could not even Give proof for a loan for a house. That more than likelihood, 50 different things that could cause death to people.
And I wish I was joking no seriously the contractor that was supposed to see whether or not was to be condemned. Was there, while the realtor was still selling the house to us
They were running $250000 2 room. No basement because it was flooded. 3 of the rooms had mold to the point in which my mom went into an allergic reaction when we walked into it.
But the reason why the realtors like. Oh no, this won't be good for you is because the outside of the house had mold. The inspector was also standing right there.
I really hate to break it to you but the mortgage is just the start of home ownership. We can use my property for an example if you like! My mortgage is just about $1,000 a month and that’s a lot cheaper than rent usually. I also pay $180/month for insurance, $200/month for electricity/water (no gas at my place), and my property taxes are just under $2000/year(over $150 a month). So my $1,000 mortgage is around $1,530 a month. You might think “well that’s not so bad I can still swing it”.
Let’s look at the “non” essentials now! I paid around $300 this year for weed poison and lawn fertilizer and I went with the cheap stuff. The septic was last pumped 15 years ago (I’ve owned for 1 year so it’s not my fault) and that cost $900 for the pump. Could have been A LOT more expensive if there was issues. I took a few dead trees down saving $6-7,000, but a lot of people don’t have the know how and would have been forced to pay. Hail took my roof, the insurance bent me over and gave me $6,000 and I spent $8,000 on materials and two weekends for a net loss of $2,000. Once again, without my knowledge it would have been a $15-20,0000 expense. My furnace also went out and I decided to get a heat pump instead for $12,000 installed. Would have been $10,000 for just the furnace. I paid the money for that one because that stuff is dangerous and I know better than to touch it without knowledge.
Add that up! Sure a lot of those are one time bills, but it’s crazy to think your house won’t break in some way. Because I knew how to do everything, I only spent $25,000 on maintenance LAST YEAR. If I didn’t know the people I do or have the knowledge myself, it would have been an extra $17,000 easy.
The bank isn’t going to loan to you because of that. They don’t know that a $30,000 year won’t bankrupt you.
2008 called.
They have strict safeguards for a reason. And while it does prevent most who easily could have a loan.... it also prevents people from losing EVERYTHING due to stupidity and/or rapid changes in their lifestyle
This is the way it works. My tenants moved in and said they would be there for a year and then buy a house. It has been 6 years now. They are no closer to a house than they were 5 years ago. Now they have a baby. The value of my house has tripled. And they have paid me enough in gross rent to pay for my initial purchase price and rehab costs. Now interest rates are too high for them and all the houses in the neighborhoods they would like to live in have gone up in price as well.
How long ago did you originally buy the house?
The 6 year payback of original purchase price doesn't make sense unless you bought it like 30+ years ago.
This is St Louis. $68,000 total cash for the house and then the rehab costs brought it up to about 95,000 total. It is a 3 bedroom house sitting on a 1/4 acre lot at the edge of the city limits in a good area.
The math is different here. I just bought a house for $46,500. I have another $8,000 into rehabbing it and maybe need another $3,000 more. That house has a 4 to 5 year gross rent payback, depending on the breaks.
Crazy to me a house worth less than 100k rents for more than 1,300 a month. St Louis is unique. Great deal for the owners. Thanks for sharing.
Which means landlord are taking bigger financial risk to deal with the uncertainty if a tenant could afford $1000 a month, while bank aka government backed mortgage programs cannot.
Where’s the debate? You have no savings. A lender assesses risk when considering you for a loan and if you have no savings you’re very high risk.
And don’t get me started on all bills included renting. As a twenty year old, I thought this was great, not having to worry about fluctuating bills or being in charge of any of it. What a moron I was
OP: Why won't banks lend to me
Also OP: The stupid banks caused the 08 crises through their stupid lending
There’s a massive difference between this and the 08 crisis. They were giving out tons of subprime loans on faith before the bubble burst, while OP has a long history of paying more than that on housing every month. Considering the fact that they would be making it twice as easy to afford the payments in this scenario, aside from proof of monthly housing payment, what would you think banks should require to provide a loan that should have no problem being paid back? If banks were taking that into consideration, far fewer people in OPs position would be considered subprime.
I could understand to a degree if OP had a history of evictions or had been in their place for less than a year, but people with a solid rental history are being turned away despite the fact that rental payments aren’t reported on your credit in most cases, so bad credit isn’t even talking about that. People are just paying so much in rent that they have a hard time paying for other things and that affects their credit score, but most people make sure they have a place to live first and foremost.
FHA Loan Requirements for 2024 - NerdWallet-to-dollar1149825-(ceiling))
OP is stupid. You can very easily get an FHA loan.
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So what do you want, banks to have zero percent down?
Please come to reality
It's because they need to know they can unload it quickly at a slight loss if you default and the best way to do that is to make sure there's some equity. Plus it makes it less likely someone will default if they have some skin in the game.
Do they have the down payment? Do they have the stability?
They have statistics and history to underwrite your credit worthiness
Renting is also cheaper than living in and maintaining a home
This post reeks of ‘millennials who are scared of “adulting”’ energy
Dependent on individuals. Each person is different and should make their own decisions to buy or rent!
Perhaps tenants should get equity in the landlords property then they could take out a home equity line of credit to buy their own home. /s
How about getting kicked out of a place nearly 7 years ago and it still affecting anything even though you paid that off
Well yeah. Evictions are expensive and time consuming for the landlord. Why would anyone want that risk given other options?
What about 6 years of renting perfectly after that?
Time helps, but if I'm choosing between an applicant with 6 years of perfect renting and an another with 7+, it's an obvious choice on its own.
No i totally understand that. Its the “person lost job at that time and had to move” so it wasnt even an eviction(at least in words) it was an unlawful detainer, meaning we owed a month of arent plus “fees” which were all paid up. So in theory that should actually make it a better show that person got behind, caught up and was able to pay the owed money as well. And it still sticks. But the whole point was in regards to buying, not renting. Doing all that would show i am just as reliable as the person with perfect rental history. I didnt bail out on it. I paid it, 100% (pretty much paid the rest of what was left of the lease when that happened too) and still had to find somewhere else to live. When buying things like that should be taken into consideration if there is a mark on the record like that(again, only if those were met, i am not saying anyone who gets evicted is cleared… just those that actually took care of it)
Getting behind and catching back up still shows that you're less reliable than someone that never got behind in the first place though.
If you were meant to own a residence the economy wouldn't be set up so an ogolopoly controls 70% of housing
It's because there are private companies that want to own all the houses so we all pay them rent forever
This comment section is a bunch of koolaid drinkers
Theoretically if there was no government involvement in mortgage lending there would be more companies who would unironically do exactly as the OPs image implys. To allow a long term renter to take out a mortgage based on their current long term rent payment.
Also the idea of down payment requirement is silly, if you get a 20% discount and there’s 20% in equity, that is superior than somebody who puts 20% down on something that is already at 105% of value. But the government does not want banks focused on the equity in the home, rather they want them focused on ability to repay. The bank is more concerned about LTV, the government is more concerned about down payment+income, because the government cares about ability to repay which shouldn’t be the be all end all if there’s equity in the deal.
It’s not like a car which can drive away. The house is stationary. The banks already do this with cars, because there’s no federal loan programs for automobiles.
What?
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Someone doesn't understand LTV ratios and their relationship to risk.