Quote:
Originally Posted by tool001  well i have quest for you. (this is live in property ,, and not investment prop)
take,
i pay about $1100 a month rent.
if i wait for 6-10 month to find a new place (planning to buy)
thats is putting 6600-11000 down the drain, in rent cause in the end i dont get anything out of it? |
This is the wrong way to look at it.
Consider that for the first 5 years of your mortgage you'll be paying 70% to interest. Thus if:
rent == (70% of mortgage) + property tax + condo fees
you're not throwing anything away renting.
Quote:
Originally Posted by tool001 supposedly u are buying a place for 340k. and over the next year market does go down about 3-5 %. how much do you expect to save...
340-3-5% is 325-320?, do you see market going down more than 10%? |
1. The market went down 20% in 2008. So it can go down > 10%.
2. What will happen? No-one knows, all we can do is speculate.
3. I think we'll see a small drop (5-10%) followed by a decade of flat prices. I've posted why several times in this forum, please read some of the other threads and make your own decision.
Quote:
Originally Posted by tool001 and over this time you are building equity. yes, you are paying maint and tax, but u will be paying that regardless when u buy? |
First lets define the term equity: its money saved. Whether it be money paid down on a mortgage or money put into a bank account, equity == money.
Lets revisit this formula:
rent == (70% of mortgage) + property tax + condo fees
and add this formula:
rent savings > equity paid down on mortgage
which becomes:
mortgage + property tax + condo fees - rent > (30% of mortgage)
Thus if you're saving more on renting than you're paying down on the mortgage, you're better off renting and saving the difference. The reason most like owning is it forces them to save, they cannot trust themselves to save the difference while renting. I think that's a really stupid way to force yourself to save.
Note: These formulas don't account for cost of ownership (taxes, lawyers, fees, commissions), which is typically 8% plus any maintenance. This skews the formula in favour of renting.
Note: On a typical 25yr mortgage, you'll only pay down 13% of equity in the first 5 years. Subtract the 8% cost of ownership, and you're only left with 5%.
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