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Comment by ryandrake | Hacker News Reader

Just a minor nit pick, but important: When comparing the costs of renting vs owning, you need to compare rent+fees to mortgage_interest+property_taxes+fees, minus any real estate tax deductions (if you itemize). The principal portion of your mortgage payment is not an expense, it turns into your own home equity so it's money coming out of one pocket and going into the other. The interest portion is generally federal tax deductible, and your property taxes as well (unless you hit the SALT cap which hopefully expires after 2025).

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> Just a minor nit pick, but important: When comparing the costs of renting vs owning, you need to compare rent+fees to mortgage_interest+property_taxes+fees, minus any real estate tax deductions (if you itemize). The principal portion of your mortgage payment is not an expense, it turns into your own home equity so it's money coming out of one pocket and going into the other.

You need to compare both numbers, because that equity doesn't do much to help you make your payments.

    > it turns into your own home equity so it's money coming out of one pocket and going into the other

What if house prices are falling?

Your home equity = your property's value minus your loan balance. So even if that value is currently negative, every dollar you pay towards principal increases it. It's not an expense.

Your expense is that you've hitched yourself to an oversized loan, so you're putting money from one pocket to another, except the latter has a hole in it and you have an obligation to keep feeding it. If your cost was only mortgage interest, you'd be happier with 600k outstanding at 1% than 300k at 4% for the same house.

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