Have they stopped quitting because they like their jobs or because they are back in debt now so they cannot quit?
Had $20k of student debt at one point. After that experience, I decided to live mostly without debt.
The only exception might be a mortgage of 25-33% of a house value, I'd put 75-66% in cash.
Someone who can put up 66-75% for a desirable home generally is.
Or, a $150k empty lot and $50k house (with a later $50k-$100k expansion via cash, once the cash is earned)
Saving even 20% ($100k) could take many people 5 years. so saving 60% would take 15. Part of the trade off is life momentum. We can't be spending 15 years with life goals/dreams on hold, renting means a lot of moving, being subject to landlords' whims, and generally being treated as commodity cattle for profit.
This is reality for a lot of people.
Pretty lucky for sure, but even if the increase wasn't this dramatic it would have still been better than renting...
Most say $550K sale price minus $400K purchase price == $150K profit.
But you need to remove: Taxes, maintenance, cost of your time (if you value that at all), realtors fees, HOA, bank fees/insurance, home insurance, depreciation on purchases you only had because of home ownership (tools, lawn mower etc).
Once you remove those it's hard for home ownership to make financial sense relative to investing in the stock market + renting.
However, and this is discussed in another thread, homeownership is a lifestyle choice, and we should be ok with making financially suboptimal choices for the sake of a quality life. We just need to keep clear it's an expense for a purpose, not an investment for financial gain. If we overspend on house liability it's no different than overspending on cars or food or travel.
Yeah, it's not a pure 150k return but it's still vastly larger than any other investment I could have made in 2018. It's not even close.
Calling this a "financially suboptimal choice" is nonsense.
Scenario : 400K home, $40k Down, 2 years ownership, using a realtor, getting 7% loan (today's reality, maybe not yours)
* $14688 Closing costs -- according to nerd wallet on a 400k house w/ 10% down
* ~$33K Interest -- $500K on 30 yr loadaverage is 50% interest per payment across the whole loan (much worse in first 2 years)
* $25K Realtor commissions on sale (using conservative 5%)
* $8K Maintenance - 1% per year is a standard rule of thumb
* $8K Taxes - using national average on Smart Asset https://smartasset.com/taxes/property-taxes#2YWD4iYqn0
* $1K HOA
* 10K Downpayment + $24K equity portion of payments are Return of Capital (not profit)
Net profit = ~30K profit in 2 years.
You're not just 30k up from where you were two years ago
You're also up 78k from where you would be today if you had been renting at 2k/month those two years instead
And the federal US government does quite a bit of wealth transfer to homeowners, which comes from non homeowners obviously, so renting being better than buying is only true for certain circumstances.
Although property values have gone up quite a bit in desirable neighborhoods, it's not at all uniform. Condos in particular have had a bad ~5 years, even in good neighborhoods in big cities.
We often use an argument in one area to justify a poor choice in another. It's fine to make a financially suboptimal choice to rent/buy (as is the case) to acquire a desirable lifestyle. Just as it's financially optimal to walk everywhere, but in reality we want to drive a car (and maybe a fancy one at that). It's when we start to say "This home is an investment, so I'll buy a $EXPENSIVE home"... that simply burdens us with high expenses relative to the lifestyle gains and we've actually done the opposite of good investing, for little lifestyle gained over a moderate home.
I realise that on average the index fund is likely to outperform it over the long run, but a lot will depend on your attitude to risk.
If your mortgage rate is 6%, your marginal tax rate is 50% and you're earning 4-8% returns after tax, then a risk free, tax free return of 6% by paying off your mortgage is more attractive.
On the other hand, taking out massive loans (several times what you had) for education is questionable in most cases. I've known people who are reasonably intelligent who think it is a good idea to send their children to private universities with high tuition for undergrad degrees in fields that the school isn't known for, which I find baffling.
Can you explain your rationality for this? You're still allowing the bank to have senior ownership of your house except... for less money.
If you default, they keep your house, no matter what the debt-to-value is.
Like, I understand saying "I couldn't make my mortgage payments so the bank took the house, but I guess they did pay for 90% of it".
But this seems like all the insecurity of a mortgage for a lot less money?
If you take out a 300k mortgage and pay it down to 150k principle then default, the bank sells it for 250k and gives you 100k (minus associated costs).
10 is like every second of your life is nothing but severe pain and trauma and having a rare disease
and
1 is being Elon Musk level rich/not having stress (I'm sure he has tons of high level stress none of us could relate to but... how much of that is self-induced because his definition of fun is risk/business/trying to amass more wealth?)
where does "have to work a job you don't really want to because you need to be able to afford to live" place? 5? 8? 3?