Comment by bluedevil2k | Hacker News Reader

Comment by bluedevil2k | Hacker News Reader

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Lots of bad financial advice here. “You can’t unlock a house’s appreciation” - wrong, they have home equity lines of credit, refinances with cash out. “You could do so many better things with the money” - you have to live somewhere, wouldn’t you rather live in a nice house with the potential for appreciation than rent with no chance at all?

Also, there’s tax advantages to mortgages here in the US.

Renting out a house isn’t easy money, believe me I’ve tried it. You have to find tenants, things break, a lot, that you have to pay for. In my case, the tent ants literally moved out in the middle of the night using their car headlights since they hadn’t pairs the electric bill in 5 months.

Letting your money generate appreciation (in the stock market I assume) is no guarantee and as we’ve seen the last 20 years, we could see annual gains and losses of 20%.

A house IS AN ASSET. It’s a non-liquid asset, but it’s not a liability. What’s the best test if it’s an asset or a liability? Would you want to just give it away to someone?? A house, of course not. A car loan, of course.

Mostly agree, except:

> house IS AN ASSET.

Yes, if you own your house. No, if you have a mortgage, the bank owns it.

When the market was 'normal,' this would have been less of a risky issue. Take out that 15-30 year loan with the confidence that the home's value would all but be guaranteed to appreciate.

The market has been abnormal since early 2000's. Since, the housing market has become more of a speculative and volatile market, driving prices up to levels that the market cannot sustain without liquidity from the federal reserve, which has monetized an equivalent to 34% of US GDP. Not just housing - stocks and bonds as well.[0][1]

I think we should re-think what an "asset" is, starting with the question - is an asset an asset if can not maintain its market value without with out a central bank?

Economic policy makers were so exasperated with the housing crisis, they even suggested buying down and burning homes so the prices would stop dropping.[2] And that is key - to keep the prices from dropping. Does that sound like healthy market?

[0] https://www.federalreserve.gov/monetarypolicy/bst_recenttren...

[1] https://www.zerohedge.com/markets/central-bank-balance-sheet...

[2] https://www.fool.com/investing/general/2011/10/06/creative-d...

>> house IS AN ASSET.

> Yes, if you own your house. No, if you have a mortgage, the bank owns it.

This is incorrect in most of the United States and in other countries, like England, where the mortgagee only has a lien; the mortgagor has legal title. That is, the mortgagee only has a right to obtain legal title in the event the debtor defaults. Until the debtor defaults and the mortgagee secures legal title, the debtor has legal title and owns the mortgaged property, which is properly the debtor's asset.

Even if you have a mortgage, you have some equity in it. Most mortgages require 20% down payment in your home, you can still get a way with a 80/15/5 loan now where you only have to put 5% down.

FHA mortgages are 3.5% down and really easy to qualify for.

I'll add a comment to my own comment. In the last 3 months we've seen a HUGE advantage to home ownership over renting. I recently refinanced, as lots of Americans have done with the historically low mortgage rates. I knocked hundreds of dollars a month off my mortgage payment. You think your landlord is going to knock hundreds off your rent when he refinances the building you're in? No, that extra profit is going right into his pocket.

Rent is based on supply and demand. Landlord is not going to charge less or more than the market can afford. So no the landlord won’t drop the price because of mortgage. But there’s a lot of people negotiating hundreds of dollars off their rent in toronto because the market is down and if they refuse, the renter can pick just any other place that is cheaper. And its very well possible that those landlords didn’t get a discount on their mortgage if they are locked in.

So it goes both ways.

In one case as a renter, you go hat in hand to your landlord, and beg for permission.

As a homeowner, you contact a lender and get it done. It benefits you directly.

The tax advantages are pretty rare now that the standard deduction was raised to $12k per individual. Only something like 10% of homes still use the interest deduction.

Yep between the salt tax deduction cap, incredibly low interest rates, recently lowered limit of $750k for how much home value qualifies for the mortgage interest deduction, and recently raised standard deductions, for a married couple (and maybe also for a single person but I haven’t calculated that in detail) the tax benefits of owning a house are very close to 0.

Which is probably a good thing, there’s no need to give the huge breaks we have been the past few decades to people wealthy enough to buy a house. But what a bizarrely complicated way to go about enacting this change instead of just eliminating the mortgage interest deduction altogether.

I’m in favor of the owner-occupied mortgage interest deduction (MID) because I believe that owner-occupied housing should not be at a disadvantage compared to commercially rented-out property.

Without MID, landlords can (tend to) outbid owner-occupants for property because of differential tax treatment. (Commercial loans for profit-seeking businesses are always tax-deductible as we tax profits and not revenues.)

And tax laws can change really quickly, so even if it's not used much now, in 6 months it may be most Americans are itemizing again.

For federal taxes, maybe. But some states allow you to itemize deductions, even if you don't itemize them for federal tax purposes. This is a not insignificant advantage for me.

Other major tax advantage is zero tax on up to $250,000 in gains ($500K for married couples)

Taking your point even further, you can raise the cost basis of your house by all the improvements you made to the house while you lived there. If you added a $50k pool to a $400k home, your cost basis is now $450k.

Further, you can deduct all the sales commissions (real estate 6% fees) from the profits as well.

You deduct the sales commissions because that’s money you lost in the round-trip. (Your profits were actually reduced by the amount you paid in commissions and we tax profits/gains.)

Also, there’s tax advantages to mortgages here in the US.

For most people there is no tax advantage for having a mortgage. With the cap on state taxes now being $10K and the standard deduction being $24000 for a married couple, and interest rates as low as they are you have to a larger mortgage than most people can afford for it to make a difference.

I had a mortgage of around $340K with 3.5% down for a house I bought four years ago, and I paid less than $10K in interest last year.

I completely agree. The differentiator of "property" is that you're always going to need somewhere to live. If you have a whole portfolio then it's similar to any other bet/investment you might make on a share price - your investment might go up, it might go down - but it's not going to make you homeless. If you have no financial connection to property where you live, you're taking a giant risk.

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