For me, insurance and property tax work out to about 1/3 of my former rent (which was a smaller place than my current home). My mortgage by itself is about the same as my former rent. Based on what another commenter said about the typical percentage of payment toward interest (69% after 1 year, 55% after 10 years, 33% after 20) after a year my money-in-the-black-hole is roughly even to renting with about 1/4 of my total payment going straight to equity. After 10 years that goes up to 1/3 into equity, after 20 it’s about 1/2.
Yes, my total payment is higher, but the home is larger; if I’d made a more horizontal move, the equity building rate would be more favorable. Additionally, I rented that space for 4 years and the rent went up 30%. The main thing to increase my payments now would be an increase in property taxes, which reflect an increase in property value. Personally, I felt very different about a 30% increase in rent than I’d feel about a property value increase that would bump taxes enough to raise my current payment 30%.
All I really did was convert some of what I’d save normally into the form of real estate. Home values typically increase about 3-5% annually, which is pretty comparable to most investment instruments. And I get the material benefit of a neat house to enjoy in the meantime, instead of some holdings with zero non-monetary value.
It’s not necessarily the right move for everyone. I am particularly handy, so my maintenance costs are lower than they might be for others. But so far as money-in-the-black-hole and equity are concerned, I’d imagine most people who can shoulder the up-front costs would break even pretty quickly, interest included.
And the apartments we rented in the past had shitty inefficient heating systems (gas converted oil burners and baseboard heat that cost us a fortune every winter (7-8 months a year).
Now I’m looking at installing solar and a heat pump. Not something I could have done in a rental. The asshole landlord wouldn’t even fix the sink drain.
Not to mention mortgage interest.
For me, insurance and property tax work out to about 1/3 of my former rent (which was a smaller place than my current home). My mortgage by itself is about the same as my former rent. Based on what another commenter said about the typical percentage of payment toward interest (69% after 1 year, 55% after 10 years, 33% after 20) after a year my money-in-the-black-hole is roughly even to renting with about 1/4 of my total payment going straight to equity. After 10 years that goes up to 1/3 into equity, after 20 it’s about 1/2.
Yes, my total payment is higher, but the home is larger; if I’d made a more horizontal move, the equity building rate would be more favorable. Additionally, I rented that space for 4 years and the rent went up 30%. The main thing to increase my payments now would be an increase in property taxes, which reflect an increase in property value. Personally, I felt very different about a 30% increase in rent than I’d feel about a property value increase that would bump taxes enough to raise my current payment 30%.
All I really did was convert some of what I’d save normally into the form of real estate. Home values typically increase about 3-5% annually, which is pretty comparable to most investment instruments. And I get the material benefit of a neat house to enjoy in the meantime, instead of some holdings with zero non-monetary value.
It’s not necessarily the right move for everyone. I am particularly handy, so my maintenance costs are lower than they might be for others. But so far as money-in-the-black-hole and equity are concerned, I’d imagine most people who can shoulder the up-front costs would break even pretty quickly, interest included.
And the apartments we rented in the past had shitty inefficient heating systems (gas converted oil burners and baseboard heat that cost us a fortune every winter (7-8 months a year).
Now I’m looking at installing solar and a heat pump. Not something I could have done in a rental. The asshole landlord wouldn’t even fix the sink drain.