Your response to that should be: "you are not a responsible adult until you are debt free."
That is actually one of the secrets to a lower stress longer lasting life IMO.
That is actually one of the secrets to a lower stress longer lasting life IMO.
And if we get more productive disposable income will go up and that will feed into land prices.
All the rentier need do is wait.
edit: would love to hear the counter to this from whomever downvoted me - it's a fact that with our system productivity improvements flow into land prices therefore speculating on land sees you capture these gains.
It's a funny way to represent it, but there is one person missing from that cartoon. The person that refuses to go into debt, saves until they have the money to spend on whatever it is they want to buy. Another useful addition would be someone with a mortgage that they actually pay off on, their net worth would likely dwarf the net worth of the beggar.
Bingo. Never been in debt and glad of it.
There's another person missing from that picture - a person who has debt and has positive net worth.
Honestly debt is not a boogeyman, it can be very enabling and given the current economic situation, interest rates and economic outlook people saving are going to end up on the losing side in the long run.
That's me!
> Another useful addition would be someone with a mortgage that they actually pay off on, their net worth would likely dwarf the net worth of the beggar
And they're so old their body has given up and they spend their days sitting in front of the TV, thinking about all the things they wish they did in their life.
That is very much not necessarily true.
I don't think home ownership is a decision to be made lightly and I disagree with the idea presented in the article that it should be done to make money, but there are definitely numerous benefits and the idea of a mortgage being somehow evil just because it's debt is extreme. As another commenter mentioned, debt is a tool which can be used poorly or wisely.
I bought this current flat (outside of London) primarily as an investment (gentrification is already happening here) and so the much lower "rent"/mortgage (than even renting in this city) is an upside. I wish I'd bought in King's Cross 10 years ago, but that's how life goes.
But I do get the social pressure to "own". Under 30s these days are screwed. I always thought London was overpriced, but it kept going up and up and up... At some point, the bubble will burst, but the Tories don't care about the future for anyone but themselves at all.
As an aside, my friend just finished off his <$100 quid a month mortgage he got in the 80s and his two up-two down is easily worth 200K now. I think he paid like 50K overall?
On a personal level, buying a house might be more than you care to take on. But with a mortgage, you can certainly predict what your payments will be for the next 10, 15, or 30 years.
And it can be renegotiated when interest rates drop.
Understanding this is what makes people responsible adults. What makes them irresponsible is buying things on a whim on credit and carrying large credit card balances. That is indeed a great way to ensure a stressful life.
I have no issue with mortgages entered into by people who understand how to live within their means. There are lenders who prey on those who don't truly understand what their means are, sure, but that doesn't make the whole enterprise of home ownership a faulty one.
And before anyone nitpicks: yes, you do own the house you buy with a mortgage. It's security for the loan, and the mortgage gives the banks the right to take the property away from you to settle your debt. On well negotiated loans used to purchase property smartly, it can actually be an investment. One that may not pay as much as an index fun after 30 years, but in the meantime, you've had a place to live.
I would also suggest that many (not most, just many) people without a mortgage are unmarried and/or not parents. There is an intangible benefit to "setting down roots" and "making a home of memories" with a family. I, personally, have found that to be invaluable.
You'll need your house value to rise to at least ~225% of its initial purchase price over the life of your mortgage just to break even.
That doesn't count the time you spend on repairs and maintenance of your property that you never get back.
Here in the US, I have friends still under water from 2008, so house values don't always go up (and this is in the pricy DC metro area).
All investment is a risk. Never buy a house because you feel you should - do it because you want to. You want to put in the kitchen of your dreams, you want to live near family, you want your kids to grow up in one house their whole childhood.
If you make a profit in the end, wonderful! But don't do it for that. Rather, decide the kind of life you want to lead (do you enjoy moving every few years? Do you want to live abroad for 5 years? Do you prefer he flexibility and lack of responsibility that comes with renting?) and live that - if a house fits into it, great!