Re:It Is Not About the Money, Silly, It Is All About the Time
by webwright on Wednesday August 27, 2014 @12:41PM
(#8233052)
"The primary reason that your mortgage is considered "good debt" is because the asset you purchase with that debt (your house) will typically appreciate faster than the interest you pay."
Any money manager will tell you that what you just said is false. Excepting a few cities, when you look at the data and adjust for inflation, owning a house is not a particularly good investment ( http://files.foreclosureradar.com/images/foreclosuretruth/Hi... ). Add in that the average home loan lasts about 6ish years before folks sell/refi, the fact that interest/fees are front-loaded into the first 5 years of the loan, and that avg. annual maintenance on a house (NOT improvements) tend to average about 1% of the value of the home per year, it gets worse.
What it CAN be (if you're disciplined and lucky) is leverage and liquidity. Example: I have my house paid off. I get a mortgage on it, essentially getting a loan at 4% for $700k. Now I have $700k that I can make work for me-- a worthwhile idea if I can find a way to make more than 4% on that $700k via other investments (which are not remotely risk-free, but can pay off). Of course, what most people do when they re-fi their house is self-indulgent stuff-- buying a vacation home, a boat, home improvements that don't pay for themselves, etc.
Any money manager will tell you that what you just said is false. Excepting a few cities, when you look at the data and adjust for inflation, owning a house is not a particularly good investment ( http://files.foreclosureradar.com/images/foreclosuretruth/Hi... ). Add in that the average home loan lasts about 6ish years before folks sell/refi, the fact that interest/fees are front-loaded into the first 5 years of the loan, and that avg. annual maintenance on a house (NOT improvements) tend to average about 1% of the value of the home per year, it gets worse.
What it CAN be (if you're disciplined and lucky) is leverage and liquidity. Example: I have my house paid off. I get a mortgage on it, essentially getting a loan at 4% for $700k. Now I have $700k that I can make work for me-- a worthwhile idea if I can find a way to make more than 4% on that $700k via other investments (which are not remotely risk-free, but can pay off). Of course, what most people do when they re-fi their house is self-indulgent stuff-- buying a vacation home, a boat, home improvements that don't pay for themselves, etc.