Why get a 30 year mortgage at 40, to only pay it off at 70 and then die in two decades? It feels like the wrong thing to do but…I really don’t know how else to look at it.
Sure. I could afford a house today where I grew up. But I’d have to surround myself with the highly undesirable culture (in my opinion) in those places. To put it nicely.
If you can find a home you like more than places you can rent, and the payments are similar enough, seems like it’s still better to get a mortgage.
A mortgage payment can’t increase like rent can and most likely will, forcing you to move every X years if you decide you can find somewhere more affordable.
Of course there are tradeoffs in the other direction, like if you need to move to a distant location for job/family/health, I just don’t think it’s as one-sided as you present it.
You buy a house, service the mortgage while you're there, then sell it (using the proceeds to pay off the mortgage), and if you've not made a bad investment, you come out with more money than you went in with, which presumably, you put toward a down payment on your next home. If you're downsizing, it may mean you're buying your next home outright, or with very little of the capital borrowed.
Unless, of course, your property value declines. Watch out for bubbles, and get sensible insurance to mitigate the risks.
1) Inflation hedge. 2) At some point in the next 30 years, you will be able to sell your home at / above what you paid for it, just due to the cyclical nature of things.
I'm not saying real estate always goes up... but for example, I bought at age 41. $515k. Current estimated value, $900k. When the kids are all graduated and out of the house (when I'm 53-54ish) I can sell this, buy something outright in cash, and increase my saving rate from ~35% to about 60% without any change in my current standard of living.
Having a pension that can cover living costs while NOT having to also cover rent gives a lot of security. While it's also an option to get cheaper rent and put the difference into another investment, rent costs are hard to predict, so I'd rather not end up worrying about it later in life.