Comment by tzs | Hacker News Reader

Comment by tzs | Hacker News Reader

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You can still build considerable equity even if you are moving every few years, even if prices and interest rates are steady.

For example lets say you buy a house for $250k and pay $50k down, taking a 30 year 6% mortgage. Your monthly payment would be $1199.10.

Then you move in 5 years, selling the house for $250k and buying a new house for $250k. At that time you still owe $186k on your mortgage and have paid $59k interest. You are left with $64k net after paying off the mortgage, and use that as a down payment on the new house. You take out a $186k 30 year mortgage at 6%.

Your monthly payment on the new mortgage is $1115.81. But instead of paying that, continue to pay $1199.10, the payment on your original $200k mortgage. That extra ~$75/month goes toward principle.

Move again in 5 years, again selling for $250k and buying for $250k. You owe $167k, so net $83k which goes to the down payment on the new house. So this time you take out a $167k 30 year 6% loan. The payment would be $1001.25, but keep paying $1199.10.

Say you keep moving every 5 years and keep selling for $250k and buying for $250k, putting the net after each sale into the down payment for the next house, taking a 30 year 6% loan, and making monthly payments of $1199.10.

30 years after you bought the first house as you come to the end of 5 years in house #6 you will have just paid off mortgage #6 and so you end up in a fully paid off home 30 years after you started just like you would have had you stayed in the original house for 30 years. You've also paid the same total in principle and interest that you would have if you had stayed put.

Yes, it’s possible to build equity this way, but man there are much better ways. All that assumes it costs nothing to move which is ridiculous; especially if you’re the seller.

In Canada, the seller always pays the realtor fees for both buyer and seller, and both parties will pay for independent property inspections by qualified professionals. Preparing a home for sale usually incurs at least some small reno work to make it more attractive vs other properties on the market. Moving expenses and lawyer fees, while not outrageous also are a factor.

Technically there are commission-free ways to conduct home sales, but those still have associated costs (lawyer fees don’t go away) and lack protections buyers want so are avoided by the majority of buyers. This means the home sells for many thousands less than otherwise, negating the savings. 3x the work for at best the same payout.

With everything factored in, selling and moving will often cost over 10k (certainly over 5k) for the seller. So buying a home once and staying in it for 30 years would net savings of 30-60k vs moving every 5 years for same time period. Putting that much extra money on your principle interest-free (possible once a year with most mortgages here), or say using that money for a second property to rent out, would build equity MUCH faster.

> both parties will pay for independent property inspections by qualified professionals

So strange this isn’t regulated by the state - have a single independent report as a prerequisite to even start a listing.

With markets rising, inflation, and pay not matching, what you get for that 250k is less and less each 5 year jump.

I wonder. Given that the market is sooooo sure that house prices only go up, how much is insurance for that? What does a guarantee that I can sell my house in 10 years for the current price cost? Or how about a guarantee that the mortgage is fully paid off if the house is sold, even if the sale price is below the remaining principle?

If that were, say, another $100 per month, while guaranteeing no loss in equity for me, that could be worth it.

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