Somehow it's fine to pay half the salary in rent, but not fine if it's financing the mortage.
Last year I spent twenty grand on a new roof. What's next? Idk, but that's why my mortgage isn't half of my salary. If it was rent, these things wouldn't be my problem.
That's the trade-off.
$1K/month is probably low for me though if I added up all the expenses a renter wouldn't generally have although a renter also probably wouldn't be renting a house like mine for an extended period so it's a bit hard to do apples to apples.
In any case, living in a house is very much not free even once you're paid off the mortgage--especially if you make an effort to prevent a lot of maintenance debt from accumulating.
That has to be for commercial real estate, or you've been ripped off. There is no possibility of a single family dwelling ever having plumbing problems of that scale.
But maintenance costs are in general a landlord lie. They wouldn't rent out their properties if costs where anywhere near income. As for my own anecdote, my landlord has spent at most 0,5% of what he's gotten in rent from me on maintenance over the years. A normal tenant won't break anything or induce any maintenance costs.
And I think we all saw why banks should be expected to be a lot more cautious in rating homebuyers' ability to pay than some individual landlords might be about their tenants in 2008
If we sell our home at the end of 30 years for exactly what we bought it for, no raise in value at all, 200K, then 250K of maintenance works out to around $700 per month for each month of those 30 years.
Any amount we can sell the house for over the original $200K price, reduces the taxes and maintenance down from $700 potentially to zero.
If we sell at the end of 30 years for $450K, even accounting for taxes and maintenance, we lived rent free for 30 years.
Yes, after 30 years, you came out ahead. But also, you can't sell your house when the drain breaks and you need $10,000 today to pay for fixing it. Especially if you just bought the house.
Also, you forgot to account for the $180K in mortgage interest.
My apartment that was $900/month in 2001 is $2200 today. Outside of some of the really stupid markets, it’s almost always better to own. You’ll be fixing that drain every year.
Since we control our mortgage, we paid it off early, at around 15-16 year mark (due to my wife making me realize the importance of it). We live rent and mortgage free the rest of our lives thank God. I only wish I'd kept either of our 2 former houses instead of taking better job offers requiring moving ultimately to the bay area where we couldn't afford to buy a home. Texas is nice though!
My Dad always said, buy a house as soon as you can.
https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal...
In most Bay Area markets, it makes more sense to rent than buy from a purely financial perspective. It's only if you value the ability to modify the home or have a sense of permanence that it starts to flip.
50% of income as mortgage payments are extremely risky mortgages. We've just had the entire financial system collapse not so long ago because of such shenanigans.
Don't people remember the 2008 mortgage crisis?
If you can't pay the rent, you rent something cheaper. It is not nearly that easy when you have a mortgage.
Where is it fine to rent for half of the salary? Last time I rented a couple years ago, the corporate landlord wanted to see either a paystub exceeding 4x rent for the same period or a bank statement for the funds exceeding 3x total rent. This varies, of course, but the standard used to be the 40x rule (rent not exceeding 30% of income before tax).
Because eviction is easier than foreclosure (and, actually, a lot of big property management companies look at similar affordability criteria as lending banks, but you can find mom & pop landlords; mom & pop mortgage lenders, unless they are literally rich family members making an informal loan, probably not.)
No -- mortgages are limited to 50% debt-to-income. The exact principal that relates to income depends on prevailing interest rates.
You can see this fairly easily by using any mortgage calculator, e.g., Google's (in the "Purchase budget" tab).
Keeping fixed: $100k household income, 0% down, California, Google's tax and fees estimates, 800+ credit score (just to eliminate that as a factor).
At 2% interest, Google thinks you can get a $512k (~5.1x income) mortgage (at 50% DTI).
At 6% interest, that falls to $368k (~3.7x income).
At 10%, $274k. You get the idea.
(For all of these loans, your annual payments would be about $50k/year.)