@dragoncar "but if I could predict these values, I wouldn't need a calculator I'd just be rich!"
I'm finding that the more I dig, the more obvious it is that this is the 800 lb gorilla in any type of planning. The answer to almost every question varies back and forth depending on how these values exist. I could have retired 5 years ago, or I'll run out of money when I'm 60!
A Defense of the Mortgage
Thanks teewonk & rePete,
For taking the time and addressing me.
"Living with parents": This is yet another insidiuous term that has been foisted and pushed into cultures that practised it for a very long time without any hangups! I think the concerted agenda was more to push real-estate prices up by creating a demand for housing, create a demand for "white goods", etc... But it was masked in beguiling terms to allay suspision. Before you dismiss me as a crank, check this out! . I know many Japanese and Chinese friends, I have visited those countires and lived there with them in their houses, so I can say with my own experience, that they get a bad rap for nothing. We/They do actively contribute to the household actively. The parents and the children do enjoy each others' company, which is almost never mentioned in these concerted efforts to paint a black picture.
In India, when graduates find jobs in distant cities away from their home, a distant relative who relocated there many years ago is almost miraculously "discovered" and 9 out of 10 of those relatives, when approached are only too happy to prop up these hatchlings and put them up until they find their feet in a new place (New languages can be one big barrier here, you may be aware). Also, when we undertake long journeys, we used to inform relatives living along the way of our itinerary. During the travel, as the train pulls into these stations, we will be met with smiling waving faces and get our spirits and hunger replenished with thermos full of freshly brewed Filter Coffee, home made, piping hot food and animated catching up of family events with people before train chugs off... Sadly, this has all but died out today because of this unnecessary foisting of "be independent" when some social cohesion has actually done people good.
You've got to experience all these, otherwise you will dismiss it as mawkish. I don't paint romantic pictures here. These are fairly representative examples of life in India.
There's so much bad press around this "living with parents" that I have developed a 'thin skin' for it. Sorry, I felt I owed a small explanation in the face of your decency to address me directly *blush*
For taking the time and addressing me.
"Living with parents": This is yet another insidiuous term that has been foisted and pushed into cultures that practised it for a very long time without any hangups! I think the concerted agenda was more to push real-estate prices up by creating a demand for housing, create a demand for "white goods", etc... But it was masked in beguiling terms to allay suspision. Before you dismiss me as a crank, check this out! . I know many Japanese and Chinese friends, I have visited those countires and lived there with them in their houses, so I can say with my own experience, that they get a bad rap for nothing. We/They do actively contribute to the household actively. The parents and the children do enjoy each others' company, which is almost never mentioned in these concerted efforts to paint a black picture.
In India, when graduates find jobs in distant cities away from their home, a distant relative who relocated there many years ago is almost miraculously "discovered" and 9 out of 10 of those relatives, when approached are only too happy to prop up these hatchlings and put them up until they find their feet in a new place (New languages can be one big barrier here, you may be aware). Also, when we undertake long journeys, we used to inform relatives living along the way of our itinerary. During the travel, as the train pulls into these stations, we will be met with smiling waving faces and get our spirits and hunger replenished with thermos full of freshly brewed Filter Coffee, home made, piping hot food and animated catching up of family events with people before train chugs off... Sadly, this has all but died out today because of this unnecessary foisting of "be independent" when some social cohesion has actually done people good.
You've got to experience all these, otherwise you will dismiss it as mawkish. I don't paint romantic pictures here. These are fairly representative examples of life in India.
There's so much bad press around this "living with parents" that I have developed a 'thin skin' for it. Sorry, I felt I owed a small explanation in the face of your decency to address me directly *blush*
@Kevin M, Perhaps the scenario below will explain my thinking, I may be wrong about this-- please let me know what you think.
Consider this scenario:
You start out at:
Total monthly income: $3000/mo
Mortgage payment: $1000/mo
Everything else you "need": $1700/mo
Savings: $300/mo
Assume that "everything else you 'need' " is subject to inflation
A 5 year period of higher than average inflation occurs-- 6% annually, and your income is totally stagnant.
Now you are at:
Total monthly income: $3000/mo
Mortgage payment: $1000/mo
Everything else you "need": $2275/mo
Savings: ?/mo
I think of "affordable" as a relative term, thus I view the mortgage as less affordable to the owner of the house after inflation with stagnant wages-- clearly the owner now has to cut out other "needed" things in order to afford the house. I extrapolate this scenario to deduce that a mortgage becomes less affordable to the holder of the mortgage any time inflation outpaces the mortgage holder's wage growth. Is the extrapolation valid?
Consider this scenario:
You start out at:
Total monthly income: $3000/mo
Mortgage payment: $1000/mo
Everything else you "need": $1700/mo
Savings: $300/mo
Assume that "everything else you 'need' " is subject to inflation
A 5 year period of higher than average inflation occurs-- 6% annually, and your income is totally stagnant.
Now you are at:
Total monthly income: $3000/mo
Mortgage payment: $1000/mo
Everything else you "need": $2275/mo
Savings: ?/mo
I think of "affordable" as a relative term, thus I view the mortgage as less affordable to the owner of the house after inflation with stagnant wages-- clearly the owner now has to cut out other "needed" things in order to afford the house. I extrapolate this scenario to deduce that a mortgage becomes less affordable to the holder of the mortgage any time inflation outpaces the mortgage holder's wage growth. Is the extrapolation valid?
But what if I'm a renter - assuming it also is subject to inflation, that would also cause a decrease in cash flow? Don't forget at some point the mortgage is gone, but rent goes on.
I imagine we could dream up any number of scenarios to favor either side. I certainly appreciate the flexibility renting offers, but for us a mortgage seemed to make sense.
I imagine we could dream up any number of scenarios to favor either side. I certainly appreciate the flexibility renting offers, but for us a mortgage seemed to make sense.
Assuming that inflation affects all things equally, being a homeowner would have an advantage to being a renter in that your principal and interest payments are fixed. Homeownership also has the advantage that eventually that chunk of your payment will disappear.
In my opinion, a mortgage is an extremely useful tool if you use it correctly, especially for purchasing investment properties where a mortgage can free up capital and increase returns dramatically.
In my opinion, a mortgage is an extremely useful tool if you use it correctly, especially for purchasing investment properties where a mortgage can free up capital and increase returns dramatically.
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jacob
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With regards to the cultural allergy of "are you living with your parents??", I have actually had several responses to my suggestion of downsizing going something like this "I don't think I could live/be happy/tolerate sharing a room with my spouse" and also people with children commenting that they'd go crazy if they couldn't somehow isolate such children to their respective rooms.
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jeremymday
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@ Jacob - Good way to shift the argument around. It wasn't more than a generation ago that this was the cultural norm. My parents both come from families of 7 that lived in 3 bedroom houses. (Parents in one, boys in one, girls in the other) Now your typical family of 4 has 4 or 5 bedrooms, one for the dog, and one made into an office. Craziness. This can't last forever... can it?
On another side note, no matter which way you look at it, renting or buying a house is a form of indentured servitude. The only thing that makes buying a house better in my mind is that you eventually pay it off, and its yours to keep and pass on to your spouse or kids when you pass away.
Again, in many cultures still, 3 generations of people live in the same area and housing complex. They work together, help keep each other fed, etc. And guess what? They are probably working a whole lot less then us and enjoying life more.
Whether you rent or buy remember that someone is making money in both equations. The seller of the house is trying to make a profit. The bank that loans you the money is trying to make a profit. The landlord that rents to you is trying to make a profit. And the landlord is trying to make a profit ON TOP OF the profits that the seller of the house and the bank is getting from him.
Even if it's an apartment complex the current owner still had to buy or build it which still involves someone else profiting.
What everyone has to think about is whether they want to gain control of an asset or if they are ok with everyone else owning what they are renting.
Your mindset is everything...
On another side note, no matter which way you look at it, renting or buying a house is a form of indentured servitude. The only thing that makes buying a house better in my mind is that you eventually pay it off, and its yours to keep and pass on to your spouse or kids when you pass away.
Again, in many cultures still, 3 generations of people live in the same area and housing complex. They work together, help keep each other fed, etc. And guess what? They are probably working a whole lot less then us and enjoying life more.
Whether you rent or buy remember that someone is making money in both equations. The seller of the house is trying to make a profit. The bank that loans you the money is trying to make a profit. The landlord that rents to you is trying to make a profit. And the landlord is trying to make a profit ON TOP OF the profits that the seller of the house and the bank is getting from him.
Even if it's an apartment complex the current owner still had to buy or build it which still involves someone else profiting.
What everyone has to think about is whether they want to gain control of an asset or if they are ok with everyone else owning what they are renting.
Your mindset is everything...
One of the things I find frustrating about rent/buy discussions is that I see three options: rent, buy, or finance-- each with it's own advantages and disadvantages. Yet, in conversation it seems that the mortgage is so common that buying is equated to financing, and the idea of actually buying a house outright is left out. Perhaps for the majority buying outright is unheard of, but in the ERE crowd it would seem that a large number of people would have the capital to buy without financing, if desired.
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George the original one
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