> the mortgage is much higher than the rent on the same home
That would really surprise me. Everyone I know talks about how much cheaper it would be to buy if only they could afford the deposit.
Most of the time the mortgage is lower than the rent for the obvious reason that when you rent you're both paying the landlord's mortgage, plus their profit.
> when you rent you're both paying the landlord's mortgage, plus their profit.
True, of course. But you are also paying the landlord's property taxes and maintenance costs and (sometimes) utilities and....
A pet peeve of mine is when people compare mortgage payments to rent payments as if they are a equivalent. There is a lot of additional overhead in homeownership beyond the mortgage payment.
Though maybe it's a sore point for me because my furnace died this morning and it's -40 outside so guess who gets to drop an unplanned $6k this week?
Well, possible profit. There is risk involved. Underwater mortgages are totally a thing.
More recently, a fair number of landlords are in trouble right now due to the COVID eviction pause. Their tenants stopped paying, but their own principal, interest, and insurance payments kept going clickety-clickety-click. Some of them are even walking away from the properties.
It's also important for everyone to keep in mind that not everywhere is the Bay Area, or even California. Judging nationwide housing conditions by the conditions in those regions is likely a mistake.
Many landlords do not have a mortgage. Or if they do, the cost basis is much lower than if you bought the same place today. Also, there are major costs to owning home beyond the mortgage. To use myself as an example, only ~60% of my ownership costs are the actual mortgage.
Whether or not the fully burdened mortgage is less than the rent depends on the region but it is not uncommon for the costs of owning to be higher than the costs of renting, and this still makes sense for the landlord because of differences in cost basis.
A long-tenured landlord made some money in his role as a speculator, and currently has it invested as equity in the property. Which, yes, gives him a lower mortgage payment than you would face. This $X invested in the property is yielding him $Y in marginal cash flow per month. You can do that too, assuming you have $X, by paying extra towards your own mortgage. But do you want to? Depends on the value of $X and $Y; you may be better off buying index funds.
It is surprising, and counterintuitive. In the "hot," high price to rent ratio cities (NYC, BOS, DC, LA, SF, SEA, etc) landlords don't make money in their capacity as landlords, but as speculators.
Rent is just a little bit of gravy to partly offset the cost of owning those appreciating assets. It's not the point.
That would really surprise me. Everyone I know talks about how much cheaper it would be to buy if only they could afford the deposit.
Most of the time the mortgage is lower than the rent for the obvious reason that when you rent you're both paying the landlord's mortgage, plus their profit.
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