Housing Costs-Home Owership Verus Renting

[sudsmaster]

I guess those previous owners were not too happy about being foreclosed and evicted. Still, they should face charges for the vandalism they committed on what was probably a pristine home. How sad.

When I bought this place, a realtor wanted me to look at another home in the hills. The current owner was in the process of being evicted due to foreclosure. I passed on the chance - I just didn't want to deal with the drama. Plus the home was perched on the side of a ravine - and that is earthquake/landslide/forest fire country. I bought in the flatlands instead and have not regretted that... except on those occasions when I crave a bay view. Then I can just drive up to a turnout in the hills and soak it in all I want ;-).

Re: home as an asset. Yes, I suppose that is true. For me it's sort of a safety net - if I run out of funds in retirement I would consider a reverse mortgage. But I'm trying to avoid that scenario. I don't want to have finally paid off the mortgage and then turn around and put the home back into hock ;-). Plus, although I plan on making this my last residence, there's always the possibility that I could sell this place and move to a more peaceful rural (cheaper) locale for my golden years.

 

[tolivac]

I still have mixed feelings about trying to buy a home-One time while playing around with one of those "mortgage calaculators" on the computer-you will find if you pay the full 30yr term of a 30yr mortage-depending on the interest-what you pay in interest could be more than twice to four times the value of the home.But I do like the possiblity of having the place and being able to do with it what you want.I kinda made the mistake of buying a 30+ year old place that needs much work.At present don't have the time or money to do it.Its difficult when you do the shift work.At the same time trying to live in an apartment working mids is impossible.I have tried-the LANDLORD made more racket than the other residents of the apartment house.I then moved to a house-mids was a lot easier to do.Next home will be a newer one that doesn't need as much work-then could keep up with it.That is kinda bad about homes being trashed by the previous householder during a foreclosure-the house then goes back to the possesion of the bank or lender.They try to auction or sell the place off to try to pay the balance of the loan.Many folks don't like lenders or banks these days-esp the big ones.I am sort of hoping the home I am in is the last I have to get.But jobs may be the determining factor-If your job goes south-then you have to move to another.

 

[toggleswitch]

My understanding is in NY state you can own your own home, deed and all.

a)There would be a lien on it by the bank holding the mortgage.
b)There is also the possibility of a "mechanic's lien" which is placed by a tradesperson when owed money for working on your house.
c) Tax liens are liens placed by tax-collecting entites when one has not been up-to-date.

ETC.

Ownership includes not only the subject property but the level of the total bundle of rights included in the sale.

FEE SIMPLE estate- outright transfer of property and full bundle of rights. (no tenants or leases involved). ["Do with me what you will."]

LEASE FEE estate- The transfer of a property that has one or more lease encumbrances (and one or more tenants). It includes the right by the tenant to use a space for a fee. This, of course, reduces some the rights of the owner from the total pool of the bundle of rights.

LEASEHOLD estate- Generally the rights of the TENANT when a lease exisits. May include the value of the difference between contract (lease-stipulated) rent and market rent, which is value to the tenant in a sub-let situation. These rights are often transferable for a fee (by the tenant to another tenant).

With a condominium one owns a specific unit with a deed and common ares are shared deeded and shared as tenants-in-common. Condominiums may look like private homes, townhouses, apartments in a building or even a retail/commercial unit/store. It is a form of ownershp, not a physical type of structure. (In the same way "rented" could be any type of property). Fees are called "common charges", and tend to be minimal, as most of the time unit owners pay for their own heat and utlities.

Cooperatives are very common in NYC, (which did at one time not allow condominium ownership). Take an ordinary large aparmtment buildng (even with common utilities, such as heat and hot water) incorporate it as a corporate entity. Each unit owner then buys shares into the corporation which gives one the right to occupy an apartment. Income to the corporation is in the form of fees collected (from the tenants) which are called "maintenance fees" and include things such as fuel for heat, water, landscaping, snow removal, repairs, salaries and often electricity when purhcased in bulk (not individually metered to tenants). No deed. Harder to get a mortgage. One does not technically own real property. Due to uderlying mortgage or land-lease, maintenance payments are often quite high.

Of course the price of real-estate is all about supply and demand which hinges upon location, and amenities and attraction therein. Undeveloped land "in the middle of nowhere" also serves to keep prices low. Here in my area most of the prmary and secondary sites (land) is gone and it's now tertiary sites that are undeveloped. To get a prime site you generally have to buy an exisitng property and improvement and demolih it. (And you can't demolish it if landmarked). The process does get pricey.

 

[maytagmark]

sudsshane

Thanks for the offer,If I ever decide to move to Florida I will look you up,When I bought this house I said it would be my last move,you really can't beat the weather here or the house prices. Mark

 

[petek]

In some places, ie. Vancouver, there are/were two different types of condo ownership.. Leasehold and Strata title. IIRC Leasehold condo's were for a duration of 99 years therefore less expensive. Strata title was enduring.

 

[petek]

Re buying a condo especially a new built you should be aware that initially the monthly maintenance fee is likely to be on the low side. A reflection that since the building and all of its systems are brand new and haven't cost anything in repairs or maintenance, yet. That will no doubt change as the building ages in a few years and money from the reserve funds gets spent on repairs requiring an increase in monthly maintenance fees from each of the owners. It can turn into a nightmare if the building was poorly constructed

 

[rocketeer500]

Like with everything, you just have to do the math.....

Long story short, I looked at renting vs. buying. When I bought my current house in 2001, I didn’t have much money for a down; I had to do some creative financing. But what I came up with was this:

Based on the selling price, my “net” per month is around $930 a month. This includes mortgage payments, HOA fees, property taxes and insurance (but, you also have to take into account your mortgage insurance and property taxes are deductible—and now PMI). This was clearly less than anything I could possible rent for the same space.

Even when the average home price is well over $600k, here in Southern California, and if you look past the sizable down on one of these homes, your “net” monthly cost is still well below the price you’d be renting for the same amount of space. Don’t forget, as the housing prices skyrocketed, so did the rents. All in all, the cost difference has maintained itself.

So, for me, buying is always more desirable than renting. It just makes economic sense.

 

[selectomatic]

Of course, a lot depends on your lifestyle and temperament.

If you move around frequently, buying and selling can be a pain. If, like me, you tend to stay in one place for a long time, there's a definite benefit to buying. And with a fixed-rate mortgage, your principal and interest payments never go up.

I also want my home to be mine. Really mine. Not only do I want to have a title to it, but when I decided to tear out a closet in the uselessly laid-out upstairs kitchen in order to remodel it into a bar, I just did it.

When I wanted to divide a strangely proportioned bedroom downstairs into two studios, I didn't have to get permission.

When I wanted to cut holes in walls to install some oddball vintage record-playing equipment, nobody tried to stop me.

No landlord, Condo Association, or Home-Owners' Association has any say in what I do -- and that's the way I like it.

-kevin

 

[toggleswitch]

~your “net” monthly cost is still well below the price you’d be renting for the same amount of space.

This is, of course, why outrageously high purchase prices are frequenlty overlooked. It's about the monthly costs.
Ditto why when taxes go up, prices fall, and when interest rates go up, home prices fall. Bottom line is what is it gonna cost me "mensualmente".

My house on Long Island has outrageously high taxes.
Same house in NYC is double the price, but FAR FAR FAR less in taxes. End result: the monthly payments would be comparable.

BTW, in NYC selling featurses are the neighborhood and for some folks, access to public transportation. On Long Island it's the school district.

So if in some states you don't technically own your home when there is a mortgage, by what mechanism/documents does all that work?

 

[toggleswitch]

Home ownership is one of the most effecive ways to beat inflation, and is one of the best ways to get relatively guaranteed return-on-investment.

(Just don't buy next to a crack-den or a whore hosue--same thing!).

 

[sudsmaster]

I have been under the impression that here in California the bank technically owns the property until you pay them off in full. They hold the deed in trust (or the homewoner does). All I know is that I signed a big stack of documents with a real estate agent and a bank that I trusted. My impression is that I have all the liability and responsibility of ownership, along with many but not all the freedoms. I must take out homeowner's insurance to keep the mortgage, for example, because the house is collateral on the loan. Maybe I do own it. I don't know. I know I'll be very happy to have the darn thing paid off. I know I gave a little smile when my principle payments finally exceeded the interest payments - even though this means less of an income tax deduction.

Speaking of which, the mortgage interest deduction "pays you back" only in relation to your tax bracket. If you make a lot per year, the value of the deduction is proportionately higher, at least in dollar terms of lower taxes.

I think I have pretty reasonable mortgage payments, and I've figured how much my mortgage, property taxes, and h.o. insurance are costing me per month. But I haven't figured out exactly how much the mortgage interest and taxes reduce my taxes by being deductible - in part because my income has fluctuated so much in the past five years. But whatever it is, I couldn't have the space and freedom if I rented as I do owning the home.

That said, I recall that while I was renting from the landlord from hell, periodically I would realize that the place, for me, was really relatively low maintenance and that gave me a lot of leisure time (which unfortunately was mostly spent dealing with a daily 3 hour commute). Now that I own, I've spent a LOT of time on the house and the landscaping. It's fun, but it's also indicative of the much increased responsiblity and time demands owning a home can impose. Of course, I could have left the property treeless, with a pond full of stagnant water, and had lots of time on my hands.

 

[washabear]

I like being a homeowner. The aforementioned benefits of being able to do anything you want with your house are great. And I do find that in my area, rents for an ordinary two-bedroom apartment often surpass what one’s total mortgage payment could be for a modest but very nice townhouse, which is what I have. That could be changing, though, because entry to homeownership is getting more and more difficult here in Maryland as the DC commuter radius continues to expand, driving up prices in previously reasonable distant areas. Even house prices in southern Pennsylvania are high now as people continue to buy farther out. That is good for present homeowners but bad for those trying to get in.

Of course, the need to perform regular maintenance and “housekeeping” is something to consider, too. Most of the time, it’s not a big deal. However, there are always unforeseen circumstances, those little disasters that happen at the most inopportune times. For those times, I think it is important that homeowners keep a “rainy day house fund,” some liquid money available for when the unexpected strikes. Just something else to consider when thinking about buying a house.

 

[launderess]

Do Not Forget AMT

As in Alternative Minimum Tax.

Start earning too much money and then you are hit with AMT, which will cause you to loose most deductions, including those realted to mortgage/housing.

 

[toggleswitch]

When I did tax preparation in a CPA firm....

The saying was the "Alternative Minimum Tax." is neither.

 

[frigilux]

I lived in a ground-floor warehouse apartment for nearly 14 years before I bought my house. I was living in a 1-bedroom apt. above a business, and when the business moved out, I approached the landlord about turning the first floor into a warehouse-style apt. for me. Being a bit eccentric, he agreed, came up with plans and asked only that I agree to live there at least 2 years. He was a fantastic landlord; He gave me the numbers for the plumber, electrician and fix-it guy he used and said "When anything needs to be done, just call them."

My landlord passed away in 2001 and I wanted to purchase the building (asking price: a mere $20,000). I loved my expansive apt, and would have 2 small apts. upstairs to lease, which would cover my mortgage. Unfortunately, the bank said no, because they wouldn't allow my primary residence to be in a commercial zone (this building is right on main street).

So....I bought a house 2002. And I have to say that I now love having windows and lots of natural light, a nice yard and garden, and a garage.