Quote Originally Posted by Diapositivo View Post
I agree with all the post, and I arrive to say that also regarding houses smart people earn interest instead of paying it.
I mean that if people knew some financial mathematics they would easily understand that it is much cheaper to rent a house, and save and invest the difference between rent and mortgage, than paying a mortgage.

I have actually put my house on sale. I will invest the sale proceed in shares, earning dividends (very easy to make 5% after taxes nowadays, I hope I sell my house before the next stock bubble). The dividends will pay for a nice rent on the outskirts of Rome, plus a comfortable "rent" living.

Mortgages make people poor. Buy a house when you have the money to pay it cash, I say. A mortgage is a way to pay interest on a large capital. Saving is a way to earn interest. A mortgage instalment is much bigger than a rent for the same house if the market is in a normal state. The monthly difference, properly invested for the long term, will buy a house faster than the mortgage.

I don't know where you get your numbers, but it's cheaper to pay a mortgage than to rent something if the same size. It's just that most people don't have enough for a down payment. Also you can't "move around" too much.

Still it's foolish to pay rent when the money is going into the owners mortgage instead of just paying your own. The homeowners game is long term, you don't see the benefit until around the time you hit the 10 year mark, then you really start understanding the increase in value and actualizing the profit as real estate values increase over inflation.


~Stone

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