Why it’s gotten so hard for many people to get a mortgage

[Kellhound]

See, this is what I mean.

Now, factor in how much higher her home insurance is per month, how much she has to pay to replace stuff that wears out, how much time she spends on additional chores like shoveling driveways in winter and mowing lawns in summer, and so on.

Not to mention locking up a significant portion of your available wealth.

Renting means throwing more money away for no control over your home. General upkeep on a house is not very expensive generally unless you are incapable of doing it yourself. Plus, most rentals around here require the renter to maintain the landscaping and shovel the snow, unless its an apartment, and apartments just suck.

[Endus]

Renting means throwing more money away for no control over your home.

Having a mortgage also means "throwing money away"; every penny that goes to pay off interest rather than pay down the principal.

It's just a silly argument.

[Narwal]

Depends on where you live. Also you should focus on living on somewhere affordable. At the end of the day is it really worth living in that big city if you can't even afford it?

That's ridiculously expensive also. Here it's about 930 for a really good Bachelor. 1100$ for a 1 bedroom.

Meanwhile, in Des Moines, Iowa.

https://www.catchdesmoines.com/media...ines-rankings/

[Kathandira]

Renting is usually more expensive than owning.

In the long run, you are correct. But initial starting cost is far lower.

In NJ we are over 50% renters. Meaning, less than 50% of adults in NJ are home owners. Coming up with $20k-$60k isn't so easy. You could opt to pay less than the suggested down payment, but then you have a PMI tax that you have to pay.

It's pretty tough in densely populated states, if you don't want to live in places like Newark, Camden, or other less than desirable towns (Aka, Scummy places where you are likely to get robbed).

[Narwal]

Having a mortgage also means "throwing money away"; every penny that goes to pay off interest rather than pay down the principal.

It's just a silly argument.

Home owning typically pays a lot less in interest. If you're living in a home you can afford, and have a 15 year mortgage. The interest you pay is going to be much less than what you pay to rent even a cheap place for that time.

The true interest cost for the lifetime of my mortgage is $41,000, which is a 15 year mortgage. That's an average of $227.78 interest a month. The rest of that money I spend comes back to me as equity.

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In the long run, you are correct. But initial starting cost is far lower.

In NJ we are over 50% renters. Meaning, less than 50% of adults in NJ are home owners. Coming up with $20k-$60k isn't so easy. You could opt to pay less than the suggested down payment, but then you have a PMI tax that you have to pay.

It's pretty tough in densely populated states, if you don't want to live in places like Newark, Camden, or other less than desirable towns (Aka, Scummy places where you are likely to get robbed).

PMI is not a very large payment. I had one because I was moved to action to buy quickly, before I had really even considered buying a home, by the first-time home owners credit that was being given at the time by the Federal Government. I'm sorry but if the government is going to furnish every room of a new house for me with all brand new furniture, I'm going to go ahead and make that happen.

Insurance rate 0.41% per year*
Loan amount $180,000
Annual premium $738
Monthly premium: $61.50


Read more: http://www.bankrate.com/finance/mort...#ixzz4KiDQOTiv
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The bigger issue with not making a down payment is that it takes some time to build equity in the house, and prices of houses can fluctuate a bit of course. You want the safety of knowing you owe less than the value of the house. Being underwater sucks.

[ItachiZaku]

Most of the times people napkin-math that, they forget two things; property taxes, and upkeep/maintenance. If your pipes break in an apartment, the landlord pays to fix it. If it happens in your house, you do. Plus, there's replacing water heaters, repairing/replacing roofing, general wear and tear, all that is additional costs that homeowners bear.

Also "little" things that people overlook, like mowing the lawn/shoveling snow!

[Endus]

Also "little" things that people overlook, like mowing the lawn/shoveling snow!

And before someone says "but I shovel my own snow, it costs me nothing", your time has value.

[Gamdwelf]

Renting is usually more expensive than owning.

Not really. There are far more expenses with owning property.

[Kellhound]

Having a mortgage also means "throwing money away"; every penny that goes to pay off interest rather than pay down the principal.

It's just a silly argument.

I buy a house for 150,000. I pay 850 a month (which includes my property taxes). After 5 years that is 51,000. Say I had to spend 5000 for maintenance, so 56,000 total for 5 years. 16000
I rent the same house for 1000 a month. After 5 years I have spent 60,000.

Thus for renting and buying to equal out, after 5 years my house will have to have lost 20,000 in value.

[Revik]

Having a mortgage also means "throwing money away"; every penny that goes to pay off interest rather than pay down the principal.

It's just a silly argument.

I feel this is a short sighted view of the whole picture. Yes in the short term what you are saying is true but in the long term you have to factor more things.

Like rents going up which you have little or not power to change while someone with a fixed mortgage payments stay the same. Yes insurance can go up and taxes can go up depending on where you live but this isn't as dramatic as rent.

Another thing you have to factor in is building equity. I know you discounted this already but you simply cannot do this long term. If your home happens to go up in value like $10,000 dollars or more that is money you earned by not doing a thing. This is a possible source of additional money that you have NO chance of getting if you rented. Yes it is an investment with risk and you could lose money instead. Also as time goes on your mortgage payment goes more towards principal than interest which is like paying yourself. In effect the money you are throwing away is getting less and less per year.

[Gamdwelf]

I feel this is a short sighted view of the whole picture. Yes in the short term what you are saying is true but in the long term you have to factor more things.

Like rents going up which you have little or not power to change while someone with a fixed mortgage payments stay the same. Yes insurance can go up and taxes can go up depending on where you live but this isn't as dramatic as rent.

Another thing you have to factor in is building equity. I know you discounted this already but you simply cannot do this long term. If your home happens to go up in value like $10,000 dollars or more that is money you earned by not doing a thing. This is a possible source of additional money that you have NO chance of getting if you rented. Yes it is an investment with risk and you could lose money instead. Also as time goes on your mortgage payment goes more towards principal than interest which is like paying yourself. In effect the money you are throwing away is getting less and less per year.

And in the US, you can write off the interest at tax time.

[chazus]

As someone who doesn't make a ton of money, buying a house was probably one of the things that saved my ass.

I had meh credit score (~640?) but was still able to secure an FHA loan.

I was paying ~800-850 a month in rent for a 2bd 1.5ba. My Mortgage+HOA is 650 for a 3bd 2.5ba. That's 200 a month I'm saving, and also building in assets. Effectively, every year I have $2000 more than I did before, that I could in theory use on maintenance/repairs/whatever. Or just more money I have that I wouldn't have had.

[Tradewind]

Having a mortgage also means "throwing money away"; every penny that goes to pay off interest rather than pay down the principal.

It's just a silly argument.

Renting provides nothing in return in terms of stable equity growth. Even if only half of your mortgage payments end up going towards the principle, that's still building net worth. As your mortgage matures, you start paying directly against the principle.

Additionally your mortgage will be locked in for at least 5 years, versus a lease agreement which could be renegotiated on an annual basis. Potentially costing you more and more each time unless you're in a rent controlled situation. Then there's the risk if the landlord wants to sell, you have no say in the matter.

Ultimately it does depend upon the market in your area whether your home value remains secure against what you borrow on it. But CMHC rules for us, provide a pretty lofty amount of "instant equity" by setting rules for how high of a % can be borrowed against the value of the property.

Even as a quick example, to rent a home identical to the one I own will cost anywhere from $1900-2300/month. That doesn't include utilities. My bi-monthly mortgage payments insurance and property taxes, don't even come close to that. Which is crazy. Sure there are cheaper rentals in Calgary, as low as $1000/mo, but they don't compare to my own home in terms of the neighborhood and quality of the property itself, most are just basement suites rather than a full 2200 sq ft home with landscaped property.

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And in the US, you can write off the interest at tax time.

I wish this was something we had in Canada. The best we can do is hope that our RRSPs/Investments can pay off the remaining mortgage, then reloan the money back to ourselves with a line of credit on the property to rebuy the RRSP or investment. Cuz we can deduct loan interest, but not mortgage interest lol.

[Tyrianth]

As someone who doesn't make a ton of money, buying a house was probably one of the things that saved my ass.

I had meh credit score (~640?) but was still able to secure an FHA loan.

I was paying ~800-850 a month in rent for a 2bd 1.5ba. My Mortgage+HOA is 650 for a 3bd 2.5ba. That's 200 a month I'm saving, and also building in assets. Effectively, every year I have $2000 more than I did before, that I could in theory use on maintenance/repairs/whatever. Or just more money I have that I wouldn't have had.

Do you not pay property taxes or have homeowners insurance? Those would definitely eat into that $2000 a year.

[Jotaux]

Having a mortgage also means "throwing money away"; every penny that goes to pay off interest rather than pay down the principal.

It's just a silly argument.

Theres a difference between paying a portion of that money to interest and paying all of it to the landlord. My apartment in Burnaby is rented out for 1350 and the mortgage payments are $800 a month. Last year 5,000 of that went to the principal, leaving 4,600 wasted on interest. Add in property taxes of 1300, and strata fees of 2200, 8100 total was wasted. If I was renting the place that would have been $16,200 in rent. That wasted money will just decrease with time as the principle decreases.

[zenkai]

Here is an article from MarketWatch about the current mortgage situation.

http://www.msn.com/en-us/money/reale...BJVW?li=AA4Zjn

What do you think? Do you agree with the author's assessment that mortgage is too hard to get now, and the restrictions should be eased. Or do you think the current standards are fine?

Last time we eased restrictions, dumb-asses bought homes they couldn't afford, banks lent money to people with bad credit and when it all blew up, it was Bush's fault.

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Having a mortgage also means "throwing money away"; every penny that goes to pay off interest rather than pay down the principal.

It's just a silly argument.

Compared to renting it doesn't, at least you're building equity.



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I feel this is a short sighted view of the whole picture. Yes in the short term what you are saying is true but in the long term you have to factor more things.

Like rents going up which you have little or not power to change while someone with a fixed mortgage payments stay the same. Yes insurance can go up and taxes can go up depending on where you live but this isn't as dramatic as rent.

Another thing you have to factor in is building equity. I know you discounted this already but you simply cannot do this long term. If your home happens to go up in value like $10,000 dollars or more that is money you earned by not doing a thing. This is a possible source of additional money that you have NO chance of getting if you rented. Yes it is an investment with risk and you could lose money instead. Also as time goes on your mortgage payment goes more towards principal than interest which is like paying yourself. In effect the money you are throwing away is getting less and less per year.

That's because it is short sighted, only someone bad with money will tell you to rent instead of buying.

[chazus]

Do you not pay property taxes or have homeowners insurance? Those would definitely eat into that $2000 a year.

I believe my taxes are rolled into my mortgage per the agreement. Homeowner's insurance is pretty cheap, honestly. I think it's literally like $40/mo. So, yeah. I guess 1500 then. Still, that's literally "1500 more a year saved + assets"

[melodramocracy]

Renting is usually more expensive than owning.

Not when you factor in repairs, put a price on your ability to basically go where you like, etc.

[kaid]

Renting is usually more expensive than owning.

Well that really depends. If you purchase a brand new house then at least for the first 10 year or so that may be correct. But after that housing repairs/maintenance tends to offset the difference pretty heavily. Also there is the time/energy you use maintaining the yard/property that you would not be doing while renting.

Generally especially on older houses unless you are super handy and or a contractor yourself owning a house winds up more expensive in the long run.

[Tyrianth]

I believe my taxes are rolled into my mortgage per the agreement. Homeowner's insurance is pretty cheap, honestly. I think it's literally like $40/mo. So, yeah. I guess 1500 then. Still, that's literally "1500 more a year saved + assets"

$800 a month that includes taxes?! I can't even find a mortgage for like less than 1500 and it definitely doesnt include taxes.

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Well that really depends. If you purchase a brand new house then at least for the first 10 year or so that may be correct. But after that housing repairs/maintenance tends to offset the difference pretty heavily. Also there is the time/energy you use maintaining the yard/property that you would not be doing while renting.

Generally especially on older houses unless you are super handy and or a contractor yourself owning a house winds up more expensive in the long run.

Being more expensive is fine, because with a house you're paying into an investment. Unless you let the house turn to shit you will more often than not turn a profit when you sell it. With renting you get nothing in return.