patrick.net

OK--I'm growing tired of this. How about this. What new rights do you have as an owner once you have paid off the mortgage? Or what additional rights do you have when you buy with cash vs. with financing?

You should be able to name some, right?

Like you're entitled to any appreciation in the asset. Oh wait, you get that when you have a mortgage.

Or you have the right to make any changes to the asset as you see fit. Nope--you get that either way too.

Or you are responsible for any liabilities. Sorry, that applies both ways too.

So, what are the differences again?

tatupu70 says

OK--I'm growing tired of this. How about this. What new rights do you have as an owner once you have paid off the mortgage? Or what additional rights do you have when you buy with cash vs. with financing?

You should be able to name some, right?

Sure. You now have full rights to your property that you finally own. Not just the possession rights. You cannot lose it to the previous owner (mortgage holder) because of an inability to pay the mortgage. You are not forced to carry insurance on your house to cover the mortgage in the case of theft, damage, fire, etc. Do you know that if insurance carriers refuse to issue you insurance then this will break the mortgage contract and you will have to pay in full to keep your home? Many people forget this, but it is right there in writing. I had one house that had a fire close to it in the Sierras in 2004 and I was close to having this happen to me. After contacting nearly close to 10 insurance companies I finally found one that saved me. True story and I thought I was screwed.

You can sell your home without having to involve the previous owner. If you wanted to pass it to a family member it is as simple as hiring a lawyer and change the name on the title (which you now have in your possession). If you have a gambling problem and want to throw you home into a pot that you feel you can not lose, then you can do it. It is your home now, not the banks.

I take huge pride in the fact that I have titles to property. Until I got the titles I was always aware that if I lost my job, no matter how much equity I had built into the place I could actually be at risk of losing it. Just like many people in this country are right now as I type this. It doesn't matter that you paid down your mortgage for 5 years (never missed a payment) and now all of a sudden cannot make the payment. Add to it that no one will buy your home for the cost of the remaining mortgage and that put you in a very dangerous position. The bank then exercises its right to take possession rights away from you and do what it is necessary to recoup the skin it has in the game.

Even after you have title and ownership rights you still have the obligation to the city. You still have to pay taxes and if you don't you still risk losing your home. However, that is the closest you can get in this country to actually being in the free and clear. You like mortgages, then you must also like gambling. I have a huge distaste for both. Maybe because math is my specialty as opposed to luck.

Lastly, when you buy with cash, you actually focus on the value of the asset when you negotiate. Not the monthly payment. In my experience this is a much better bargaining position. Seller hate it though, but they also realize that any form of financing these days is very risky and can fall through at a minutes notice. If we were all forced to only deal in cash this country would be in such a better place financially and I would feel so much better about what we are leaving behind to our children. Currently, I feel like I need to apologize to my children for our stupidity.

tatupu70 says

RentingForHalfTheCost says

Owner of the title (legal document showing ownership) owns the home

Exactly--the bank doesn't own the title, you do.

The bank is holding it until you pay off the loan. Then they give it back to you.

I can't tell if you're just trolling or if you really believe that there is no difference...

Lord have mercy... (I'm not even religious).

Hey, can I hold onto your retirement money? I won't own it, I'll just hold it for you. Jesus - I'm done here.

A mortgage is a loan procured by a buyer to pay off the seller of a piece of property in full. The buyer then owes the mortgage lender the total amount borrowed, plus interest and fees. As collateral or guarantee of payment, the lender of the mortgage holds the deed or ownership of said property, until the buyer pays the mortgage off. However, the buyer occupies the property as if it were already his or her own.

above paragraph was from this site

http://www.wisegeek.com/what-is-a-mortgage.htm

Once upon a time, what you could afford matched the money in hand. That proved to be an insufficient means for growing the amount of money some people wanted. So a system was devised to redefine what you could afford so that people would spend almost all of their lifetime net earnings in an instant by agreeing to occupy a house and pay that money in monthly payments.

FunTime says

So a system was devised to redefine what you could afford so that people would spend

And not to mention every 10 or so years along comes an economic downturn and these 'some people' get to reclaim their rentals.

FunTime says

Once upon a time, what you could afford matched the money in hand. That proved to be an insufficient means for growing the amount of money some people wanted. So a system was devised to redefine what you could afford so that people would spend almost all of their lifetime net earnings in an instant by agreeing to occupy a house and pay that money in monthly payments.

BINGO! God it feels good that someone gets it. Focusing on the monthly and using that as an affordability index is down right silly.

ptiemann says

sounds good, but that's a fairy tale and it's BS. People have borrowed at least as long as there was currency.

I live a fairy tale life and I'll have it my way. I'm not going to borrow money to buy a Lamborghini either. I can't afford it.

RentingForHalfTheCost says

Currently, I feel like I need to apologize to my children for our stupidity.

lol---so you came up with exactly zero differences. Well done.

RentingForHalfTheCost says

As collateral or guarantee of payment, the lender of the mortgage holds the deed or ownership of said property, until the buyer pays the mortgage off

Ding, ding, ding, ding. Do you see the word collateral in that sentence?

RentingForHalfTheCost says

BINGO! God it feels good that someone gets it. Focusing on the monthly and using that as an affordability index is down right silly.

Don't be ridiculous. You have to live somewhere so the proper accounting is to compare the cost of renting vs. the cost of buying. And this cost comparison is best done using monthly payments.

It's also useful to look at the local market and the last selling price of the house, but comparing montly payments is not silly.

Realtors Are Liars says

tatupu70 says

RentingForHalfTheCost says

As collateral or guarantee of payment, the lender of the mortgage holds the deed or ownership of said property, until the buyer pays the mortgage off

Ding, ding, ding, ding. Do you see the word collateral in that sentence?

Ding, ding, ding, ding. Do you see the sentence "lender holds the deed" in that paragraph?

Sure--I agree the lender holds the deed. You own it, but the lender holds the deed.

If buyers only look at "how much per month?", than prices are absolutely dependent on interest rates, since interest rates affect the monthly payment. Higher interest rates = higher monthly payments -> lower prices to compensate

wthrfrk80 says

If buyers only look at "how much per month?", than prices are absolutely dependent on interest rates, since interest rates affect the monthly payment. Higher interest rates = higher monthly payments -> lower prices to compensate

Yep--they are most definitely dependent on interest rates. What history has shown is that this dependence is much weaker than their dependence on unemployment, or wage inflation.

Realtors Are Liars says

If that were true, the borrower could sell it un-impinged. He cannot. Thus he does not own it.

I'm not even sure what you are trying to say there. A borrower can sell their house whenever they want--the loan balance is due upon sale, of course.

RentingForHalfTheCost says

You are not forced to carry insurance on your house to cover the mortgage in the case of theft, damage, fire, etc.

I forgot to address this. Carrying insurance is a part of the loan contract. The bank is protecting the asset that is being used as collateral in the loan. It implies no ownership.

RentingForHalfTheCost says

Lastly, when you buy with cash, you actually focus on the value of the asset when you negotiate. Not the monthly payment. In my experience this is a much better bargaining position. Seller hate it though, but they also realize that any form of financing these days is very risky and can fall through at a minutes notice. If we were all forced to only deal in cash this country would be in such a better place financially and I would feel so much better about what we are leaving behind to our children. Currently, I feel like I need to apologize to my children for our stupidity.

That sums it up quite well. Well said!

FunTime says

Once upon a time, what you could afford matched the money in hand. That proved to be an insufficient means for growing the amount of money some people wanted. So a system was devised to redefine what you could afford so that people would spend almost all of their lifetime net earnings in an instant by agreeing to occupy a house and pay that money in monthly payments.

It's amazing how eager people are to sign up for voluntary serfdom/slavery in "the land of the free" isn't it?

Even when the mortgage is paid off, you don't "own" your house. Try missing a few property tax payments and see how much you really "own."

Even when the mortgage is paid off, you're renting the land from Your Local Government.

wthrfrk80 says

Even when the mortgage is paid off, you don't "own" your house. Try missing a few property tax payments and see how much you really "own."

Even when the mortgage is paid off, you're renting the land from Your Local Government.

Well, yes, in an abstract sense, you don't own anything.

And yes, if you don't live up to your responsibilities such as property tax, income tax, or if you deal drugs out of your house, it can be confiscated.

But, if you live up to your responsibilities, you legally own your house.

But what does "ownership" even mean if you have to pay someone annually just to keep it? That's not my definition of "ownership."

wthrfrk80 says

But what does "ownership" even mean if you have to pay someone annually just to keep it? That's not my definition of "ownership."

Several things off the top of my head. The owner is entitled to any profit or loss on the sale of the asset. The owner is entitled to make any changes as he/she see fit to the asset (provided said changes aren't against any laws or codes). The owner is responsible for any liabilities due to said asset. Etc, etc.

The government taxes many things--it doesn't mean it owns them.

robertoaribas says

then don't ever own anything: Your car? nope, if you don't pay the registration and insurance, you can't drive it anyways...

Very true. You don't "own" your car. Even if you do, it rapidly depreciates. The decision to lease a car rather than own can make a lot of sense. Do whatever option is cheaper and/or more convenient.
robertoaribas says

income on your stock investments? Nope, if you don't pay the taxes you get in trouble.

I don't have to pay anyone anything to hold on to a stock. Sure, if I get dividends that's considered "income" and is subject to tax. If I sell the stock, I have to pay tax on the income from capital gains. That's not the same thing as paying someone constantly to avoid having an asset confiscated.

Realtors Are Liars says

tatupu70 says

The owner is entitled to any profit or loss on the sale of the asset.

There is no profit on a house. It's a loss.

Aye, nobody's ever made a profit on a real estate transaction.

Bigsby says

Aye, nobody's ever made a profit on a real estate transaction.

Sure, you can make money speculating on real estate. You can also lose money speculating on real estate. Just like any other kind of speculation.

If I'm going to speculate, I prefer assets that are much more liquid and diversified, like stock index funds.

Comissions are also cheaper than Realtor fees. And index funds don't require re-painting and landscaping. Or property taxes. Or insurance.

And if I lose my job, I can easily take my index funds with me.

wthrfrk80 says

Sure, you can make money speculating on real estate. You can also lose money speculating on real estate. Just like any other kind of speculation.

Who said anything about speculating? How about owning a house for 25 years and then selling at a profit?

Realtors Are Liars says

Bigsby says

Realtors Are Liars says

tatupu70 says

The owner is entitled to any profit or loss on the sale of the asset.

There is no profit on a house. It's a loss.

Aye, nobody's ever made a profit on a real estate transaction.

I said a HOUSE. Learn to read.

Realtors Are Liars.

Aye, nobody's ever made a profit on a real estate transaction involving a house.

Learn to make sense.

wthrfrk80 says

Bigsby says

Aye, nobody's ever made a profit on a real estate transaction.

Sure, you can make money speculating on real estate. You can also lose money speculating on real estate. Just like any other kind of speculation.

If I'm going to speculate, I prefer assets that are much more liquid and diversified, like stock index funds.

Comissions are also cheaper than Realtor fees. And index funds don't require re-painting and landscaping. Or property taxes. Or insurance.

And if I lose my job, I can easily take my index funds with me.

You don't say. Hardly the points our resident WUM was making though, are they?

And since when does it have to be either or? The two things aren't opposite sides of the same coin. Last time I checked, you are allowed to own a house and stick money in Vanguard.

tatupu70 says

Who said anything about speculating? How about owning a house for 25 years and then selling at a profit?

Can I be sure I will make a profit after owning a house for 25 years, after inflation? Even with property taxes, mortgage interest, insurance, and maintenance?

If so, great. If not, it's just speculation. Better to diversify my speculation than put all my speculative eggs in one basket.

A lot can happen in 25 years. What if I lose my job and have to move? What if the area sees massive job losses and the RE market tanks? What if interest rates go up and I have to lower the selling price for the "howmuchamonthers"?

A house is NOT an investment. It's a place to live. Rent vs. Buy depends on which option is cheaper.

Owning stocks and bonds for the long term is investing. Real estate is speculation, unless you're a landlord getting a steady return on investment in the form of rents.

wthrfrk80 says

tatupu70 says

Who said anything about speculating? How about owning a house for 25 years and then selling at a profit?

Can I be sure I will make a profit after owning a house for 25 years, after inflation? Even with property taxes, mortgage interest, insurance, and maintenance?

If so, great. If not, it's just speculation. Better to diversify my speculation than put all my speculative eggs in one basket.

A lot can happen in 25 years. What if I lose my job and have to move? What if the area sees massive job losses and the RE market tanks? What if interest rates go up and I have to lower the selling price to for the "howmuchamonthers"?

Err, well of course it's speculation - you are talking 25 years in the future! The same applies to sticking your money in stocks - nobody knows what will be happening then. And yes, you may spread your risk, but if you rent for 25 years, and rent at a high cost if you live in NY, then you are going to blow through one hell of a lot of money with nothing to show for it.
The fact is that for a lot of people buying a house is a pretty logical decision to make. Your problem is that you live in NY and others on here in the BA.

I don't live in the Bay Area. Where I live (Corning, NY) housing is very cheap. But it's for good reason. There are only a few major employers, and if even one of them moves away or shuts down, it's a huge hit to the RE market. The market is pricing in the risk.

I'm NOT saying it's always bad to buy. If you have a stable job in a stable industry, and the cost of buying is reasonable compared to renting, it makes sense to buy.

wthrfrk80 says

A house is NOT an investment. It's a place to live. Rent vs. Buy depends on which option is cheaper.

Owning stocks and bonds for the long term is investing. Real estate is speculation, unless you're a landlord getting a steady return on investment in the form of rents.

Presumably it's investing only if you make a nice profit when you cash in your stocks. Anyway, I don't quite see how buying a house on the down is speculating whereas buying stocks when they are on a high is investing. RE has gone up in the long-term just as stocks have. When you enter and exit the market is the more important issue.

wthrfrk80 says

I don't live in the Bay Area. Where I live (Corning, NY) housing is very cheap. But it's for good reason. There are only a few major employers, and if even one of them moves away or shuts down, it's a huge hit to the RE market. The market is pricing in the risk.

I'm NOT saying it's always bad to buy. If you have a stable job in a stable industry, and the cost of buying is reasonable compared to renting, it makes sense to buy.

And again, most people don't know how stable their jobs will be into the (long-term) future, but that doesn't necessarily matter as long as you make reasonable financial decisions when you own. Plenty of people have lost jobs but have still made a killing from their houses whilst others have lost everything. That's what happens in life.

Bigsby says

Plenty of people have lost jobs but have still made a killing from their house whilst others have lost everything. That's what happens in life.

So you're admitting if I "make a killing" or "lose everything" on real estate, it's mostly luck? Here's an idea: how about not gambling in the RE market to begin with? If RE prices in Your Town are so volitile that you can "make a killing" or "lose everything" buying RE, maybe the smarter thing is to rent? Let the landlord take all of the risk.

Realtors Are Liars says

tatupu70 says

How about owning a house for 25 years and then selling at a profit?

When you sell it at a profit, let us know.

Realtors Are Liars.

I've done it 3 times in the past.

Bigsby says

Presumably it's investing only if you make a nice profit when you cash in your stocks. Anyway, I don't quite see how buying a house on the down is speculating whereas buying stocks when they are on a high is investing. RE has gone up in the long-term just as stocks have. When you enter and exit the market is the more important issue.

I buy stocks for the steady cash flow in the form of dividends and share buybacks. Not constant buying and selling (i.e. speculating).

RE is not "down." If anything, it's just getting back to the historical mean (nationwide average). Google "Case-Schiller housing index."

Yes, stocks are overvalued. Sucks doesn't it? Cash is losing value thanks to the Fed, so everyone is "yield chasing" in riskier assets instead. The Fed holds the cards in this game.

wthrfrk80 says

Bigsby says

Presumably it's investing only if you make a nice profit when you cash in your stocks. Anyway, I don't quite see how buying a house on the down is speculating whereas buying stocks when they are on a high is investing. RE has gone up in the long-term just as stocks have. When you enter and exit the market is the more important issue.

I buy stocks for the steady cash flow in the form of dividends and share buybacks. Not constant buying and selling (i.e. speculating).

RE is not "down." If anything, it's just getting back to the historical mean (nationwide average). Google "Case-Schiller housing index."

Yes, stocks are overvalued. Sucks doesn't it? Cash is losing value thanks to the Fed, so everyone is "yield chasing" in riskier assets instead. The Fed holds the cards in this game.

Housing is down compared to what it was, and at or near historical norms in many parts of the US. And if constant buying and selling = speculating, then how on earth does buying and living in a house for 25 years translate into speculating while sitting on stocks doesn't???

Bigsby says

And if constant buying and selling = speculating, then how on earth does buying and living in a house for 25 years translate into speculating???

Ok, point taken. Living in a house for 25 years is not speculating.

If only it were possible to live in the same place for 25 years. Seems like the world changes too much for that.

wthrfrk80 says

Bigsby says

Plenty of people have lost jobs but have still made a killing from their house whilst others have lost everything. That's what happens in life.

So you're admitting if I "make a killing" or "lose everything" on real estate, it's mostly luck? Here's an idea: how about not gambling in the RE market to begin with? If RE prices in Your Town are so volitile that you can "make a killing" or "lose everything" buying RE, maybe the smarter thing is to rent? Let the landlord take all of the risk.

Where am I saying it's just luck? I said no such thing. I simply said some people have come out ahead and some people have lost out (especially recently). Historically though, far more people have come out ahead in their RE purchases.

And there's absolutely no gaurantee that you will sell your house at a profit after 25 years, after taking inflation into account. During that 25 years, that house "investment" generated "negative dividends" in for form of:

1) Mortgage interest
2) Property Taxes
3) Insurance
4) Maintenance

The benefit of the house comes from money saved on rent. You don't want to overpay for that rental savings.

If house prices are cheap relative to rents, you should buy. If house prices are expensive relative to rents, you should rent. See Patrick's rent vs. buy calculator to see which option causes the least loss of money (yes, they BOTH result in a LOSS of money, not just the rental option!)