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Comment by deanmoriarty | Hacker News Reader

No freaking way! My rent just went up 15% (and last year too, which forced me to move out and look for a cheaper apartment), all groceries are up 30% across the board compared to last year, I know because mobile apps show my previous receipts.

These are the times I feel dumb for not being a homeowner (despite technically being able to afford it, just didn't want to get locked down in an area for 8+ years to make the rent vs buy math work out, though at these rates of inflation the math would turn around much quicker).

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Everyone that recently bought houses made out like bandits- two consecutive years of 20% appreciation AND historically low interest rates. And as a bonus, owning a house is a great hedge against inflation!

Yeah, but you can buy a 65 inch OLED for $1200, so it balances out!

Your mortgage repayments won't go up too?

No? In the US a residential mortgage is almost always fixed rate, locked in for the entire term (i.e. 30 years). So it can basically never go up, just down if the opportunity arises and you can willingly refinance your loan as interest rates drop.

That's interesting, in the UK it's generally fixed for 2/3/5 years but then reverts to a pretty lousy rate (unless you remortgage to another fix). If you're lucky you fixed just before this all started, and won't have to remortgage for another few years when rates might be dropping again.

There are adjustable rate mortgages in the US, but far and away the norm is 15 or 30 year fixed.

OTOH, almost all commercial loans including real estate is adjustable in the US.

I believe Australia is the same.

Your principal and interest payment can never go up, but your property tax (which is included as escrow on your mortgage) definitely can. I live in Texas, and my mortgage will be $400 a month more next year because of rising property tax.

But that would go up at the same rate as renting, no? I imagine you're replying mostly to the "mortgage stays fixed" comment, but relatively speaking i think it still holds true. Sure, taxes may change, but so does the value of the dollar, etc.

In theory every cost you pay as an owner, you pay as a renter - just with less time investment as a renter. It's a convenience fee.

Mortgage payments are composed of: principal, interest, taxes, and insurance. Some people may have their HOA dues also bundled in, but most don't. In any case, HOA dues are usually pretty small (like less than $500 per year), unless you live in a condominium or a neighborhood with really expensive stuff owned by the HOA, in which case they can sometimes exceed the other components of the mortgage payment.

Most folks in the United States have fixed rate mortgages. So at the very least, the two largest portions of a person's payment will not go up: principal and interest.

The last two (or three, if you include HOA dues) generally go up over time, especially in places like Texas that use property taxes in lieu of a state income tax. Insurance will go up too, as the actual amount the policies cover (e.g. the cost of replacing the house) rise over time as well.

Edit: here's a concrete example: https://imgur.com/a/cGQm4U0

Of course, maintenance goes up over time as well--as do utilities. Not part of the mortgage but certainly part of the cost of living in a house over time. Value often increases over time as well but this isn't cash in hand over the course of living in a house.

True.

> Value often increases over time as well but this isn't cash in hand over the course of living in a house.

You can "cash out" the value increase without having to actually sell the property by remortgaging the house, but that only makes sense when rates are low.

My HOA is $700…

…per month.

Taxes are escrowed and bundled in with the monthly payment to the mortgage provider though.

My taxes went up quite a bit this year, which reflects in the monthly payment. Of course the mortgage part of it stays the same, but the overall monthly payment which includes the taxes and insurance goes up.

With a fixed rate mortgage? Uh, no.

And if you have been renting and saving money to buy a house, your purchasing power is exponentially lower when both factoring both home prices and interest rates all while your rent is increasing.

Anyone answering “no” to this is wrong. A mortgage payment includes insurance, various property taxes, principle, interest, and sometimes other items such as mortgage insurance.

Principle and interest are fixed for most people. Mortgage insurance, as an example, is fixed. Everything else is variable.

The vast majority of buyers will see huge changes (increases) to their property taxes and insurance over the lifetime of a mortgage.

There’s also opportunity cost from all the upfront and ongoing capital, and homeowners practically never include that in their monthly costs estimates. Opportunity cost grows over time, too. Not just from compounding growth, but from maintenance and repairs that you otherwise wouldn’t make.

TLDR owning a home isn’t a fixed cost, and it’s usually way more expensive and variable than people are admitting or calculating.

I have a very detailed spreadsheet where I modeled everything, maintenance expenses, taxes, fees and the opportunity cost of all those maintenance expenses going up over time as opposed to invest them in the market. I couldn’t find any online calculator that was as thorough as mine, as they all suffered from some variation of what you are describing.

In almost every single test I’ve done, buying becomes way cheaper than renting and investing the difference after 5-10 years. Pretty much the only case where renting gets ahead is basically if the house appreciates less than the rate of inflation (again, painting broad strokes here, please do not interpret me too literally), or if one wants to move too frequently (my case).

This is not because housing is some magic investment, but because fixed cheap leverage is. If I could get a 30 year fixed-rate cheap non-callable loan to invest in market indexes, it would be a similar situation, but margin is an incredibly riskier different instrument.

I didn’t say buying wasn’t cheaper in the long run. I said it’s not as cheap as people think, and it’s not as fixed as people think. There are people on this thread claiming that owning a home guarantees fixed costs for 30 years. That’s outright false, and naive.

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