EDIT: Plus, if you want to get even more exact, you should be comparing the interest portion minus the tax deduction to rent, because (at least in the US) the government lets you deduct mortgage interest from your income.

People also wildly underestimate just how much taxes and maintenance can be, because they're not monthly - if you have to escrow taxes it's more noticeable, and if you correctly account for maintenance it's surprisingly high, even on relatively new homes.

The mortgage deduction only applies if you are not taking the standard deduction, and even then only the differential really applies (as otherwise you'd take the standard deduction) - something like 87% of filers will take the standard deduction.

Remember that if you have a copy of TurboTax or something similar laying around, you can do "what if" scenarios by inventing various 1099-INTs and playing around with them.

Even if a house is fully paid off, there are a ton of expenses that relate to ongoing maintenance of a house and property that really can add up--plus taxes and insurance as you say. The details vary by age, location, type of property etc. But $1K/month is not unreasonably high especially given that a lot of homeowners will have some sort of expensive job (some of which are admittedly upgrades) every handful of years or so which will easily chew through a year of that budget.

If the idea is you want a immaculate house with everything perfectly maintained then you can have high costs, but for example my microwave door handle busted off, I rigged up a fix, it looks terrible but not bad enough that I want to spend the money to replace it until it is completely dead.

The recommend replacement interval is useally a little pessimistic especially if you buy quality meterials and pay to do the job right.

I agree the parent lifetimes are probably a bit low. But the basic point that annual costs for a house/property are significant even if you can trim a bit at the margins.

My point is mainly maintenance costs are a lot more flexible than rent. You don't fix a washing machine, you won't have a washing machine. Don't pay the rent and your out on the street.

Part of me is also sort of thinking that each year I wait the heater I will get in the future will be a little more efficient. I've been thinking about replacing it since I moved in but just recently I'm hearing people in my area talking about heat pumps so I might see if I can give it another year or two and see if that becomes more mainstream and go that way.

If you're able to take a 30 year loan w/ a 2.7% interest rate and invest the rest of the equity, your house is cheaper than someone who buys it outright in cash.

The only time I would disagree with you, however, is for poor people. "Mortgage principle is not an expense" is correct over a long-horizon, but families living month-to-month that somehow managed to purchase a house are severely unlikely to be able to really capitalize on any value generated from that. I think your comment primarily applies to upper middle-class and wealthy people.

But the working poor are also the most likely to have to change jobs, which either forces them into a long commute or having to sell the house before they're really built any equity.

this isn't entirely true either. You need to live somewhere. Yes you own the equity, but it's always going to be locked away as "home equity". It has an advantage of giving you higher debt flexibility by taking loans out against it - but to say it is the same as banking cash as compared to renting is wrong.

Unless you downsize your living or sell the house without buying another one (which means you will be renting) that money is effectively gone as far as liquid cash is concerned

Make sure to not use the deduction verbatim, but calculate the amount that the deduction reduces your actual tax bill.

Mortgages let you pay 2052 dollars against 2022 prices and that’s under appreciated by the financially illiterate.

One of the hardest things for me w.r.t. finances is removing the emotional aspect. I don't get worked up about a fee added onto my mortgage because when looking at it over a longer period of time it's insignificant compared to what I can do instead with my money. Like right now I could pay off my remaining student loans without issue but why would I while they sit at 0%? If they restart payments I'll wipe it out and there is a part of me that just wants them gone but it would be an emotional decision not a financial one. Paying off my car early was right on the line and I probably made more of an emotional decision when it came to that but no one is perfect.

Usually it auto-expires when you pass the 20% equity mark based on original sale price.

It's easier with a local lender as opposed to someone who sold off the mortgage, of course.

Can you please clarify, or point towards additional reading material?

It’s a pretty obvious play. I go into a dealership, and the first question the salesman asked me is “what do you want your monthly payment to look like.“ And I always respond with something (a little snarky) like “ I don’t care what my monthly payment looks like, I care about getting a good deal.” While a little snarky, I’m also trying to signal to cut the crap and let’s do business.

More consumers need to think that way. In the mortgage context, I think it makes a little more sense to focus on the monthly payment. However, when brokers are using 2 or 5 year ARMs to sell the “monthly payment,” that’s pretty unconscionable.

* The government lets you deduct your mortgage interest from taxes * The house will appreciate in value over the term of a 30 year loan (almost certainly) * You are paying for your interest and payment in tomorrow's money

Also, what am I going to do instead, rent? My rent can go up $50 bucks a year where my mortgage payment is locked in. For most people, home ownership is the safest and best way to build a retirement nest egg and a tangible asset to borrow against in times of trouble.

This is effectively not true anymore.

> Also, what am I going to do instead, rent? My rent can go up $50 bucks a year where my mortgage payment is locked in. For most people, home ownership is the safest and best way to build a retirement nest egg and a tangible asset to borrow against in times of trouble.

I'm going to push back a touch on this, it's not really true. Mortgage rates don't usually change in the US(because we take 30yr fixed mortgages generally). But housing costs do go up for owners: property taxes, and property maintenance.

Generally renting vs owning is mostly a wash, sometimes one is cheaper than the other, just depending on the local housing market.

Historically property has a about a 1%/yr real rate of return, so housing basically keeps up with inflation, but not much more. I know recent history makes people think this is not true, but it really is. It seems unwise to think this recent history will continue forever. Equities historically get a 4-6%/yr real return, drastically outperforming the historic returns of real estate.

But yes, lots of people tend to not save for retirement, making their houses their de-facto retirement savings. The problem is, they have to live somewhere, making their house value somewhat hard to spend in retirement.

Care to explain? Is this because the standard deduction is so high, it's generally not worth itemizing for most people since the Trump tax system adjustment? Genuinely curious; I'm a current renter, hopefully purchasing in the next couple of years. But this is an important part of the buying calculus.

But the higher standard deduction is set to expire in just 3 years (2025)[0], which will cut it in half. That may or may not get extended. So you may want to calculate if you'd be in the ~26% of filers who'd benefit from itemizing if it did expire.

[0] https://taxfoundation.org/look-ahead-expiring-tax-provisions...

> But this is an important part of the buying calculus.

I would argue it probably shouldn't be.

Anyways, like I mentioned, sometimes renting is cheaper, sometimes buying is, I'd recommend buying whenever owning is cheaper. It likely will change while you hold the property, but no sense in over-spending on a property if you don't have to.

Buying property tends to take a good while, don't get so fixated on a particular house so much that you bid ridiculous amounts for it. It might take a few years once you start shopping.

Try to put 20% down if you can, and try to limit your purchases to a single house for your lifetime. Transaction costs will likely eat you alive if you transact all the time. Illiquid transactions are always such a pain.

Good luck on your house hunt!

The entire thing also creates a cycle of "house prices must go up!" which further exacerbates the problem, at the cost of those who haven't been able to buy houses. Or worse, it creates a large amount of debt which is begging for a 2007-2008 repeat.

There's also the cautionary tale of "there is enough housing, just not enough affordable housing", as well as VCs convincing governments to tear down homes in favor of other things, further reducing the number of homes.

Then again, there's the darker perspective that lack of medical staff / medicine will significantly lower the lifespan of several generations.

House prices are determined to a large extent by interest rates [1]. People have a certain amount they are willing to spend on a mortgage payment each month. If rates are lower, that amount buys a bigger mortgage, so house prices are higher.

[1] https://www.bankofengland.co.uk/-/media/boe/files/working-pa...

We need something similar and conspicuous for mortgages. Let people really see/feel the interest.

Another way I’ve seen it phrased is in terms of buying power, and I think that can be effective. I’m ball parking some numbers here, but I think I saw something along the lines of, for the same monthly payment you can buy a $275,000 house with 5% interest or a $350,000 house at 3% interest. I think that drives the point a bit

The disclosures you get from the lender are already required to contain a a "FINANCE CHARGE" which is the total interest you will pay on the loan, "The dollar amount the credit will cost you". They also have "TOTAL PAYMENTS", the "The amount you will have paid after you have made all payments as scheduled."

The forms are formatted clearly. If you want to know what the number is, it is right there with an explanation.

People who can't (or don't want to) math aren't likely to suddenly do so because of an additional disclosure.

Why? because they have a motive. The motive is to put out a propaganda piece to try to convince the FED not to raise rates.

Look at this AI triggering headline at CNBC this morning! They are using the FEDs "favorite" inflation measure, which is 4 points lower then the typical number quoted!

https://www.cnbc.com/2022/05/27/the-feds-preferred-gauge-sho...

Wondering why stocks are up today?

These numbers are a bit high, but definitely in the ballpark [1]. BUT, I think that framing it as total interest + principal is also misleading. Let's say you locked in an interest rate of 2.75% in 2020-21. Your total interest payments on a 300k house (with 20% down) would be $112k, so total P&I would be $412k. Someone might look at this simplistically and think, wow, I'm overpaying by 37% if I take out a mortgage. But at a 2.75% rate, anyone who is financially savvy is going to recognize that as a steal. It's almost like free money, because it's being paid off over 30 years. Your $1500 monthly payment might seem like a lot now, but even with relatively low inflation, your payment in years 15-30 are going to seem like a bargain when they come around. But it's hard for many people to think in those terms.

[1] Mortgage rates right now are around 4.75% on a 30 year. Assuming 20% down on a 300k house (60k), you would take out a loan for $240k, and over 30 years you would pay $210k in interest, or a total of 510k in principal + interest. Your monthly P&I would be about $1,530.

Present value of $600k paid over 30 years is less than $600k. Depending on the discount rate it might be even less than $300k now.

You're bringing up an important point about buyers often left unaware of their total outlay, but on the flip side, their home is usually an appreciable asset, they are free to re-fi, and they also get to deduct mortgage interest.