One of her biggest reason for buying instead of renting is that we are throwing our rent money down the drain every month, receiving nothing back in return in terms of equity. She would throw the numbers at me like: $16,200 a year in rent, in ten years $162,000 we would have flushed down the rent drain. I must admit she has a very valid point and it does make me feel pretty stupid sometimes considering that 162k is a pretty big and hard nut to swallow. I messed up on that one, I'll admit that.
Sure, if I would've bought a house 9 years ago you wouldn't be reading this right now. If we could turn back the hands of time, like Ground Hog Day, heck we would all have perfect lives. Guess it's my lousy luck that I happen to live in a city where houses are pretty darn expensive and my livelihood pretty much anchors me geographically so that it is not feasible for me to move further away to areas where housing prices are much lower.
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You're not throwing your money away, especially if the house declines in value.
ReplyDeleteHow would you feel about putting 10% down and making payments for several years on a house... and then watching the market melt down so the house is now worth hundreds of thousands of dollars less than you still owe on it?
ReplyDeleteThe first nine years goes to interest not principal. Anyways as prices drop a bit further the money you saved will go a lot further towards a down payment. Do you have a $20,000 emergency fund set up in the event of some,,,,,,,,, let's say "emergency"? Fix your monthly at a comfortable monetary level. Remember you will be stuck in that house for at least 10 years.
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The "throwing money away" argument is completely specious. You're not throwing money away on your rental -- you get to live there! Are you throwing money away when you stay in a hotel? No. Its a crock, promoted by realtors and other idiots who don't understand math.
ReplyDeletePlus, your rent at $1350/mo is insanely cheap for the Bay Area (I'm assuming you have a 2BR).
I think the real story here will be the outcome of the divorce. Is the family court system going to bend you over a barrel or will you both reach an equitable solution. We want details!!
Don't forget that by renting instead of paying a mortgage, you had money left over for other things, such as savings. Such savings would produce returns at a better rate than housing appreciation, though it varies by market. Do the math.
ReplyDeleteYou have to factor in the savings due to rent being much lower than mortgage, and what those savings can add up if they bring a normal rate of return.
ReplyDeleteYou have to factor in the fact that the minute you buy a house, you have immediately lost 6% of the purchase amount to commission.
And then you have to factor in ongoing maintenance costs, property tax and insurance.
The house may still come out ahead, but not by a lot.