Here's that free calculator: 🏡 Rent Vs. Buying Free Calculator: beacons.ai/humphreytalks/freedownloads Also did you love the new Outro? Lmk your thoughts!
You're not separating out principle from the interest. You talked about it later... Maybe show that calculation as well. Even your first payment has principle.
The problem with your opportunity cost calculation is that the whole value of the home grows 2% over inflation, not just the down payment. Then there's the fact that the mortgage interest payment goes down every year as the loan is paid off. So this 5% cost of capital should be even a bit lower if you factor that in. According to bankrate's mortgage calculator, the total interest over 30 years on a $500,000 home with 20% downpayment and a fixed 7% interest rate is $558,216. $558,216 divided by 30 years is $18,607 per year. So the cost of capital is really... Opportunity Cost of down payment: $100,000 x 0.07 = $7,000 Mortgage Interest: $19,000 per year on average, rounded Less growth in home value: $500,000 x 0.02 = ($10,000) $19k + $7k - $10k = $16k $16,000 / $500,000 equals 3.2%, not the 6.6% you conclude Then we should add in insurance which is typically around 0.75% So... 1.11% for property taxes + 1.00% for maintenance + 0.75% for insurance + 3.20% for cost of capital = 6.06%
How does the calculation get affected by paying less than the assessed value? We have a right to purchase agreement on our rental, which means we may purchase the house for a set price and pocket the extra equity. Since we moved in, our house is worth 25% more than the purchase price, so even with a miniscule down payment, we would not owe PMI. How then would the opportunity cost work?
Also, what about if i do not have a house and i need to pay the rental, in that case i think is better to minus the rental cost from total cost of capital.
This is the summary of the rent vs buy decision I’ve been trying to figure out for years. The rental income vs mortgage payment calculation never made sense to me. But this is much more logical and makes far more sense. Thank you for simplifying this!
Most people are unable to handle a fall since they are accustomed to bull markets, but if you know where to look and how to get around, you can profit handsomely. It depends on your entry and exit strategy.
The fact that the US stock market had been on its longest bull run ever makes the widespread worry and enthusiasm understandable given that we are not used to such unstable markets. As you pointed out, it wasn't tough for me to earn over $780k in the last 10 months, so there are chances if you know where to go. I hired a portfolio advisor since I was aware that I needed a solid and trusted plan to survive these trying times.
I tried looking into new strategies to profit in the current market because my portfolio has been in the dumps for the entire year, but everything I tried just seemed to miss the point. Please let us know who your asset manager is by name.
Asking a real estate agent whether you should buy a home right now is like to asking an alcoholic whether they think you should have a drink lol. Homes in my neighbourhood that cost around $450k in sales in 2019 are now going for $800 to $950k. Every seller in my neighbourhood is currently making a $350k profit. Simply unreal. In all honesty, deflation is what we require. The only other option is for many people to go bankrupt, which would also be bad for the economy. That is the only way to return to normal.
Home prices will come down eventually, but for now; its best to offset some of your real estate investments and get into the financial markets or gold. The new mortgage rates are crazy, add to that the recession and the fact that mortgage guidelines are getting more difficult. Home prices will need to fall by a minimum of 40% (more like 50%) before the market normalizes. If you are in cross roads or need sincere advise on the best moves to take now its best you seek an independent advisor who knows about the financial markets.
indeed the mkt & economy has gone berserk, price of great assets like real estate, dividend paying stocks, or gold never comes down easily, in my humble opinion, buy what you can afford today, and working with a financial advisor certainly helps
I require suggestions on how to restore my portfolio and create more effective strategies in light of the huge declines. Where can I locate this instructor?
Insurance shouldn't be included or both Home and Renter insurance should be in the equation. You should be paying renters insurance. Renter insurance is usually cheaper, but also only covers losses.
The non financial reasons for owning are what made me buy a property (currently in the closing stage). As long as I pay my mortgage, no one will be able to evict me and I can finally have a pet. Those 2 things alone are worth all the sacrifices I have made to save my deposit as a single buyer. And I can finally live alone and not share a house because my mortgage on a 2bed is cheaper than renting a one bedroom apartment
I thought the same thing and everything changed when the job opportunities plummeted near me. Found myself driving 2 1/2 hours each way to my job and home, and just couldn't sustain that. Eventually I realized my home wasn't ever going to be where the jobs would be. So, I sold my home and now I rent near where my job is, where I have no worries If I need to pick up and move again.
And when you get old and retired, you are going to have your home, this is why US have a lot of homeless, one of the reasons, they cant pay the rent, your home is yours, just pay the mortage ASAP enjoy!
The three main unknowns are: - future interest rates (as the mortgage can be bought back) - property price evolution - rent evolution This calculation is useful to compare the cost on the day you buy but without those unknown values it's impossible to know if buying will end up being profitable.
Great video as usual, but a major flaw here. When we buy a home with 20% down, that is a 5X leverage to start with (the home values appreciates on the total price of the home, not just the down payment). The appreciation on home price is protected from capital gains tax (up to $500K for a family), unlike a brokerage account. The leverage gets lower as the equity increases (but then, one has built equity...) Another great thing to like about mortgage payment is that it does not increase with a fixed rate mortgage, so inflation will reduce the actual cost of mortgage payment , as you mentioned...
As long as your salary gets adjusted per year. Same store, same bagel from 3 months ago went from 2.99 to 3.99..........in NJ. Your PI is fixed but your cost of living is not.
Have you paid taxes lately? This housing bubble has absolutely caught the eye of local munucipalities and cause taxes to skyrocket. Plus, inflation causes maintenance costs are also rising beyond inflation. I put 17% down and paid all closing costs in my first home. My actual taxes went up 13% the very next year.
Agree this is an important part that was overlooked in this video. Fair points below re. taxes also. My take away is that this is pretty complicated and case-by-case or market-by-market, and not easy to reduce to a simple rule
I was thinking the same thing about leverage. If you take leverage and avoiding capital gains taxes (if you were to sell) into account it significantly changes the calculation.
While property taxes and maintenance costs will increase over the years, so will inflation. I didn’t hear any mention of accounting for the expected increase in rent over the years in the comparison.
I want to point out the fact that when you purchase a home with a mortgage it becomes a leveraged asset. That 100k down payment/ investment on a 500k home would have a higher return then 2% its actualy closer to 10%. The reason is because the whole asset of 500k is appreciating at 2% not just the 100k.
Loved Ben's video 4 years ago. This is a great update. A couple major points I don't think were touched on hard enough though: 1.) Closing costs, vary depending on location and sometimes you can get the seller to cover them but that is market dependent. 2-4% 2.) Home payments are going to stay roughly the same over time but rent also will increase with inflation. Not a great effect in the short term but a massive effect in the long term. This was touched on briefly but I worry most won't have picked up on this part. Both of these aspects mitigate the cost of the home the longer you are there.
When calculating the opportunity cost you underestimated the property appreciation. You multiplied $100,000 x 2%. = $2,000. However the appreciation is for the entire property value, so it should be $500,000 x 2% = $10,000. This is a 5:1 leveraged investment. So, the actual return on the $100,000 investment is 10%.
@@Paulhfoley You could instead take that 2% and use it in the calculation to offset the cost of debt calculation. So in his example, the cost of debt would be 5% instead of 7%
@@pirate9154 Property taxes in Florida a limited to how much they can go up per year because of the "Save Our Homes" cap so I call BS on that but we are having an issue with home insurance skyrocketing. I find it very hard to believe that your friends are actually paying more than $8000 per year more than three years ago though unless they own multi-million dollar homes in very high risk areas.
Amazing video, A friend of mine referred me to a financial adviser sometime ago and we got to talking about investment and money. I started investing with $150k and in the first 2 months, my portfolio was reading $274,800. Crazy right!, I decided to reinvest my profit and get more interesting. For over a year we have been working together making consistent profit just bought my second home 2 weeks ago and care for my family.
Hi. I’ve been forced to find additional sources of income as I got retrenched. I barely have time to continue trading and watch my investments since I had my second child. Do you think I should take a break for a while from the market and focus on other things or return whenever I have free time or is it a continuous process? Thanks
@@lennoxmutterick6434 However, if you do not have access to a professional like Clementina Abate Russo, quitting your job to focus on trading may not be the best approach. It is important to consider all options and seek guidance from reliable sources before making any major decisions. Consulting with an AI or using automated trading systems can also be helpful in managing investments while balancing other commitments.
@@waylorudd1128I’m pretty sure under 20% down you’re adding a mortgage insurance cost into your portfolio bro, and potentially a worse interest rate. There’s a reason ppl recommend at least 20% down. 🐖
One thing worth thinking about is the product, vs just the cost of the product. In my neighborhood, 95%+ of homes are owner occupied. That means there is almost no rental availability. So if you want to rent vs buy, you might be looking at different neighborhoods and different quality of life. In other words, there are other variables to consider beside the cost of owning vs renting.
It is similar to the thought that home ownership is an important financial decision: but your home isn't just an investment vehicle. You actually have to spend your life there. People chronically undervalue their time. I am curious to see whether countries like Canada see an increase in brain drain again due to housing costs. Canada only has a few major economic centers so it is more difficult to "leave" the expensive markets. As such, those with portable skills will no doubt consider global options.
Is a good point, sometimes there are limited options in certain neighborhoods. Where I live most buildings by metro stations are rentals instead of condos.
That’s right, nutty, screwball neighbors living next store. Banging, and yelling all night! Rap music with a heavy bass booming at 2:00am. Every weekend, the cops arrive and you hear your neighbors getting arrested and screaming at the cops while getting tased. Then you start seeing hub caps missing off your car. Then a week later, you noticed your car got keyed all along the side of your car frame. You come home from work, your flat screen 20 inch tv is missing along with your speakers. Not only that, the thief was hungry and went into your refrigerator and made a sandwich and drank all your beer. You go into your bathroom, and you notice some asshole peed all over your toilet seat. Of course, owning a house in a nice neighborhood is the best choice. You get like-minded people like yourself, professional white collar workers who have to pay off a big nut every month but they feel it’s worth it living in a decent neighborhood away from the screwballs and the drugs.
Here in Phoenix, the average price to rent has gone up 64% in the last five years. My home equity has similarly risen (67%) while my monthly mortgage has stayed fixed. That expense for a 2,100 sqft home is 22% lower than the median cost to rent a 2-br apartment, and it will stay relatively fixed even as rental costs continue to soar. It’s safe to say I’m comfortable with my decision to own.
Totally different in the rust belt, property taxes are extremely high and homes barely appreciate over time. I'd have about 400k more dollars if I chose to rent instead of buy if I just spent the money I put in a down payment into the S&P 500.
For someone not lucky to have been a homeowner in Phoenix prior to the inflation, it is cheaper for me to rent my 4/3 house than buy. (By about $1k a month)
Great for you but you don't compare apple to apple here. No one knows the future. You look at the back mirror and found that yours was fine. But for someone who is exactly at the point of making the decision, they can't be certain about the future of theirs
I was stuck on deciding if to continue investing or start paying for a house. I ended up selling my positions and the home turned out to be a fixer upper more than I imagined. I don’t know how long I can keep this up for.
Oh my. A fixer upper is never a good decision for a first home. I have been a landlord and property investor/agent all my life. Please consider making a list of everything that needs to be done. Then list the priorities. Priority items are only those that are required to maintain the integrity of the structure. Like roofs, septic, HVAC; the expensive stuff you can’t show off to your friends. From there look at your wants and save for those items. If you can’t cash flow it don’t do it. One doesn’t need a Bosch dishwasher. It doesn’t work any different and has poor repair history yet people will pay triple what they need to. It’s an ego thing. I made the mistake early on of spending too much money on what really amounted to decorative items. Now I set a budget and don’t do something unless I have the cash. Take a breath and do nothing for six months. You’re just weary. You’ll be fine. The goal in the end is to have a paid for house so you can afford to retire. And stay off HGTV! 😂🥰
If you've made progress, re-list the property accounting for that and pick a project that you can handle. Sometimes 2 or 3 people try to rehab the same property.
@@foley2k2 you’re so spot on with fixer uppers. I worked heavily in the foreclosure market. Probably 30% of the listings we had were homes that were partially rehabbed. Sadly, 30-40% were from medical care. People couldn’t afford to pay for care along with their housing.
I was tempted to sell just like you having lost a lot, which is over 50% of my portfolio I am seeking more effective investment approaches to scale up with in these times as I have read of investors making gains in a bear market.
Definitely mislead a lot of viewers on this one(I assume unintentionally). That Leverage(mortgage) is the biggest benefit in real estate for most Americans. They aren't getting 1.97% on 100k down, they're getting that on the 500k value of the house. This allows real estate to not return nearly as high %, while still giving the homeowner a greater return on their money. Combine that with the ability to write off mortgage interest, and it makes it much more likely that buying is more profitable than renting.
@@reecethomas1863 Yea but you also have to pay taxes on your market returns but not your house appreciation (most of the time). That more or less cancels out the lack of taking the interest write-off. But the biggest factor is the leverage, not getting that right is a major mistake and basically invalidates a large part of the analysis.
I was just about to bring up the exact same point. If you are getting a 2% return on the home valued at 500k and you only put 100k down. That means you get a return of 10% on the 100k you put down.
Same, I'm on a 25 year mortgage and it will be paid off by the time I retire. When I was 30 it seemed like an impossible dream, but my salary changed over ten years and I started saving bonuses for a down-payment because I couldn't save each month. 40 was the perfect time to buy and my friends who bought in their 20s and 30s regretted not traveling and living more when they were young.
@@annabarr1304 that’s a great point, my salary increased between 30 and 40 as well… That was a major changing factor, and I totally forgot that I had the opportunity to travel when I was younger and live in different places. Thanks for your comment, awesome and congratulations on getting a place!
My parents are landlords and own their properties without a mortgage. According to them there are a lot of burdens associated with being a homeowner most people don't take into consideration. People feel like rent is throwing money away but owning a property even without a mortgage payment can have hidden costs that makes it feel like throwing money away like rent. When property values soar, homeowners are normally happy since their net worth on paper looks larger but the catch no one really thinks about is property taxes will also go up since they are based on an assessed value. Most homeowners who experience higher property values continue to live in their homes so they end up paying a higher tax bill year after year. Another thing is home insurance, depending on variables the likelihood of a house burning down or getting severely damage is not as high as we would normally think but is one of those things that is important to have and needs to be paid for in case the probability turns out unfavorable for you. Imagine those homes that have stood the test of time and are close to a hundred years old, all those years of home insurance payments are now sunk cost like rent since nothing happened to them for the home insurance to be utilized. There are also non financial things to consider. Owning a home requires your commitment and if you end up with a crazy neighbor you can't stand it's very difficult to get out of that situation and you would be lucky if the crazy neighbor moves or someone is willing to buy your property during that time. At least with renting you are not committed as much and you can easily move out for any situation whether it's a crazy neighbor or losing your job which will require you to adapt to a new financial situation. It's kind of hard for people who have a mortgage and lost their jobs who now faces the risk of forclosure. Overall when buying a home you should never treat it as an asset for wealth building but to enjoy the most autonomy of being a homeowner who has some control over the stability of living in one place versus being at the mercy of a landlord who has the right to sell their property even if you have settled in well.
@@xombiii Not in CA. Prop 13 only appreciates the tax basis 2% per year. People with $1M properties pay less than $1k in Property tax, while the new neighbor who bought (and got re-assesed) pays $10k. yr. It has locked up inventory (no one moves) and been a constraint on the market imo. Funny part is when $1M house guy moves to TX cause he OD'd on Rogan, and buys a $1M McMansion and his taxes go up $19k/ yr. Yes he saves on the income tax, but I wonder how it all comes out. If they make $100k the Texas taxes are more. Of course there is cost of living and other political factors, but bottom line is that the tax man cometh.
I just lost my home because the landlord jacked the rent 17%, after 10% last year. I'd deal with a crazy neighbor if it meant that I wouldn't loose my home due to corporate greed.
@@pajarothebird9842 were you able to find a new home within your budget? As a renter you have more options as a home owner on the verge of foreclosure you can lose a lot of your savings on the downpayment of your home and have nothing to start with!
What happened to SVB is really scary, and goes to show that no corporation, however big, is immune to collapse. I have always had a deep-seated mistrust for corporations. I have plans to pull out most of my money, but don't know what to do with $350k sitting idly. I'd like to go into the stock market, maybe. Any ideas?
All big corps are just a cohort of centralised system working together, and any damage to one can have a dangerous ripple effect on every other one. I learned a long time ago to not trust corporations. Most of my money is in the stock market and my businesses. I keep only what I need to spend in my checking account.
@@Erinmills98 Ironically, these are the conditions in which life-changing money is made by those who remain calm, patient, and take controlled risks. Volatility goes both ways. The banks are in a big crisis. The market looks very shaky. The bigger the red candles, the bigger the green ones. I have made over $280k in the last 4 months by investing through my FA.
@@IrenaDolinsek Oh, I'm not really in the business of giving financial advisor, so you are responsible for your decisions. But I have been working with Kathleen Yanelli Carole, so you could check her out and contact her, if you want.
When I bought, this calculation would yield about $1,270. If I bought my home today, it would be $2,278. My market appreciated over time, so if your area is an area that appreciates over time, and you need a place to live, in my opinion, your best bet is to just buy and hold for a few years and let the market grow over time while you gain more equity. Great video!
The most important thing to consider is whether you plan on staying in that area or not for the next 7 years. Raise that number of years or lower it depending on the interest rate and base asset price. Opportunity cost can also hit you if you have an opportunity to earn double or triple the amount you make now, but you're anchored because of the mortgage.
This is a good video and I actually made an in depth calculator for myself back in college. I would change a few things. 1. I would add insurance to cost of home you can divide it by 12 to get monthly cost your rent has this build in already. 2. HOA is becoming more and more common and these prices are not set, increasing a lot like, especially in condos, these also restrict your freedom on your house and could have fines. 3. Utilities there are some Utilities the owner has to pay no matter what, usually sewer/trash has to stay in owners name.
I've owned before but currently renting. One significant flaw with owning is that you really don't reap the ultimate benefit (my opinion) until you sell it. So, if it's your forever home, what good is the equity? I don't believe in borrowing against your property. Now, if you're planning on purchasing an investment property (not your primary resident), then this changes the landscape.
That's a weak argument. When you retire you can sell and either downsize or start renting. If you absolutely want to stay in the home there are ways to tap the equity in the house without needing to sell. What I've done is use the home equity for the down payment to buy a rental property. We live in a time where money is going to lose value every year so it will make real estate more valuable.
@martinlord8837 I didn't mention this to create an argument. I'm just simply stating an opinion. It's good for you though to bring this up so others can explore options. I would imagine that many elderly people aren't willing to move, relocate, rent, etc., (hince forever home) and surely aren't trying to jump into some real estate business deals.
You forgot about the leverage that the mortgage gives you. The 80% of the home that you DIDN'T pay for with your downpayment will also appreciate 2% each year. A quick/dirty way to deal with that is to lower your mortgage interest rate by 2% in your calculations for rent vs. mortgage.
The housing market is inflated and oversaturated with homes being on the market with astronomical price tags just stagnant for months. It is very clear that or generation will be likely one of the most devastating bubble pops in modern history. Seeking best possible ways to grow 250k into $1m+ and get a good house for retirement, I'm 48.
I don't think here is the place for personalized investment guidance. However, I suggest consulting with a reliable advisor like Azul to ensure appropriate retirement planning.
I’m closing in on retirement, and I have benefitted much from using a financial advisor. I didn’t really start early, so I knew the compound interest of index fund investing would not work for me. Funny how I pulled in over 80% profit than some of my peers who have been investing for many years. Maybe you should consider this too
Thanks for sharing. I curiously searched for her full name and her website popped up immediately. I looked through her credentials and did my due diligence before contacting her.
What happened with me is I ended up going through a divorce at the worst possible time in the housing market. It made way more sense for me to buy a $60K mobile home than to rent a tiny apartment for around $2K per month
Bought an old house for cash last year and am renovating it, mostly myself. No mortgage and cash flowing the renovations. Half way done, going great. One of the best things I've done in a while.
I tried to do this until I realized that all my renovations took so much time and were hard to do solo. Now I’ve been hiring out these jobs here and there. IMO home ownership isn’t that great with my skill set (not handy)
In your example, the 2% home price appreciation would be based on $500,000 or $10,000 a year. Also, you can refi when rates go down. Based on my experience, rent goes up every year, especially with Wall St. owning more SFHs. Just some other things to consider.
not for my friend who has rented same apartment for 20 years and they only raised his rent a tiny amount. He was paying 500 now paying 1k a month compared to new tenants paying 1500/month downtown Sacramento, CA area.
@@andyyoo2948 I think that is a great point. However, each individual's situation varies greatly. You could have a landlord that owns only one or two properties or a company who owns thousands. The individual owner may value occupancy over greater profit margins like the company because they want to decrease their risk. This could mean lower increases over time for a renter like the commenter above. To your point, it may be beneficial to include an average rent increase so the average consumer benefits from being more aware. But I do think he roundaboutly addresses this by noting the fixed price benefit of a mortgage vs. the surprise/unknown timing of a rent increase.
Bought a home with my fiance almost 2 years ago. It has been a great experience. Those maintenance costs are real though. We spent north of 12k on improvements. But it's ours, and at 3% interest, our payment is MUCH better now compared to the rent rates in our area and we never have to worry about moving.
From Leo: Home ownership effectiveness also depends on the building repair skills and work ethic of the owner. An owner that replaces his own roof, services his own plumbing and HVAC and does his own painting and landscape maintenance is easily better off owning. If someone with no skills or motivation buys a home and has to hire contractors for all those things, the added maintenance costs lean heavily against home ownership. Just like a mechanic may drive all year and spend less than one car payment for an unskilled person.
The landlord is going to charge for roof repair at competitive rates, so it's a wash. As a renter, if you're skilled in repairs, you can negotiate with the landlord for a reduction in rent for any repairs the renter performs.
Cool story bro. But if you have a house you can use its equity a lot. For example in New Zealand you can get 1% pa loan on an electric car (and save a lot of money) using your house equity. You can install solar, improvements etc at discount. You can ask bank for a delay payment for up to 3 months (good luck trying the same trick when you renting). Also you can do maintenance of the house yourself (and save a lot), or postpone the fixes during hard years and do it when things go right. You can have pets in your house. Rent payments can grow (and they do a lot) whereas mortgage is fixed (if you fixed it). Heck, you can even rent out a room or two (or AirBnB) if you find yourself in a hardship.
Thanks for your very informative video. I never realized how much money we saved in interest by physically building our own home. We paid has we went. We never had a mortgage. While building the house we lived in a school bus converted into an RV. We paid only $75/month for the RV slot. It was a lot of work but so worth it.
Good for you! My ex-husband and I did this as well. In 1989 we bought 5 1/2 acres and lived in a 27 foot travel trailer for four years while building. Unfortunately we divorced. It cost us 240k to build our home. 10 years later when I bought my husband out the house was appraised at $1.1 million. I was only able to hang on to it for a few years then had to sell. I’m now in my 60s and renting. Take good care of one another and cherish your marriage.💜💜
In the long run is mostly always to own home. In the initial years when interest payments are high, rental costs may be higher, but after a few years, the cost of owning will likely be lower as your loan amortizes and interest payment reduces. Also, you are shielded from inflation ‘cost’ particularly for fixed rate mortgage. By year 30, you are paying very little in interest. However, rental costs will escalate almost annually at least by inflation rate, which will make rental cost in 30 years much higher.
I agree, if you’re going to stay in one place for 30+ years it’s almost always better to purchase a home. That being said the cost of equity associated home ownership also increases with inflation since as your home’s value increases, so does the opportunity cost of home ownership
You need to consider the fact that your rent will increase!! How are you going to find a place that won’t increase your rent in 30 years? The problem is people keep refinancing their loans. The very best is a 15 year loan, because the interest is lower. The ban k did offer me a 40 year loan....I only have 13 years left on my mortgage! A 40 year loan is real. The sad truth is most people never pay off their homes, and that is the REAL problem. Home ownership is the biggest difference in the haves vs. the have nots. When I first moved into my place, the place I was renting was $1,000/month, now those apartments are 2,500/month. So with buying I have a bigger place and I pay $1000 less than what I would be paying in rent.
Property tax and home insurance has gone up dramatically (ie. Florida) in many areas. Like rent, you can't always predict those rate swings. But with renting, you can always get out after your lease ends.
Your rent pays for property tax and insurance. If property tax and home insurance goes up, so does your rent !!! There is no way you can escape it: renting or owning.
@@markg-jw2hx agreed in principle, however if you're renting, you can downgrade to save money if renting, most people don't and it's not easy, but it's a doable option if you're money minded like that.
I think something people don’t often think about when thinking about buying a home instead of renting is the difference in cost of electricity. Air conditioning a 1800sqft home is significantly higher than a 900sqft apartment and should be considered as well. Especially if you don’t have shade on your home or if your home is facing west where the sun is going to set everyday
You’re comparing apples to oranges though. To get an accurate assessment on the rent vs. buy situation, you should be comparing equally sized homes. Otherwise, the comparison can be highly skewed. For example, if taken to the extreme, you could say buying is never worth it because a mansion’s property taxes and utilities alone is more than it costs to rent a one bedroom apartment.
@@alecgalbraith5604 In my state, usually when people go from an apartment to a home, they are not going to buy a home that is the same sqft as their apartment. I can’t speak to how it is in other states. 900sqft homes don’t really exist here.
@@MadisonFalcoFoods Good observation, neither is an apartment. Point is, a 900sqft apartment is comparable to a 900sqft condo in terms of electricity in the context of your original comment
Simply seeing the listing for a 2 bed/2 bath house set at half a million dollars made me realize moving away from the west coast was probably the single smartest thing I've ever done in my life.
There are pros and cons. I would want to live cheaper but in danger due to natural disasters each year that happen in the Mid West and East Coast. West coast, California, pays a weather tax since there are rarely no natural disasters that are catastrophic like elsewhere.
I rent a house all to myself for $1000/month and I'm happy in my current situation despite not having the most modern home in Grande Prairie, AB, Canada. I want to avoid lifestyle inflation and money status as you mentioned in your previous videos so I will not go into greater debt. Canada currently has a mortgage and debt problem where the country's GDP is lower than the nation's debt, due to housing debt as well as vehicle loans.
Another point to mention is that if you sell a house in less than 4 or 5 years, you take a huge loss because the loan origination costs, purchase taxes and other upfront costs don't get averaged out (amortized) over many years.
@@CharlotteSoccerHighlightsthe original statement is generally true but you bought at one of the best times, values shot up, so, congratulations! Just keep this in mind in the future, prices will stabilize and if you buy during a flat or down market those costs may not be recouped easily.
Love the video @humphrey as a CFP I do this exercise with clients all the time. Just one thing to remember when looking at the opportunity cost for the downpayment you can't use the historical average of the S&P 500 as it is an index of 500 stocks. The vast majority of ppl would never qualify under KYC rules in a portfolio or ETF of 100% stocks, they don't have the risk profile to do so. Most are a moderate/balanced investor which would be a 60/40 or a 70/30 split between stocks and bonds. That therefore would yield a lower historical average return than 100% stocks. Even Warren Buffett averages a 90/10 split. Otherwise great video!
Sorry Humphrey, Even if Median home price apreciation is 2%. By using a mortgage you are leveraging the return 5x. Meaning your return on investment is 10% not 2%. This changes everything. Canada also offers first time home buyer program where you need only a 5% downpayment. Effectively giving you 40% ROI. Not to mention there are ways to buy a house without a downpayment like having a parent or friend co-sign.
Another “cost” of owning a house is the greatly reduced liquidity of your assets. It’s very hard to access the 500k value in your home when you need it in a hurry.
This is actually a benefit for a lot of people. If they had $500k lying around, odds are they'd spend it all on the latest crypto meme coin or buy a Porshe/Tesla model X.
The inflation and the biggest stock market crash are ahead. You don't want to put all your savings into one basket anyway. I'm an immigrant to the US so as a child I had a luck to witness the life situation where all reg folk's savings went to 0 instantly (and nobody ever got it back from the bank or the government). All that people are left with were properties and land. Even 10 years ago everyone would think it'll never happen in US. But now... it personally think there is a quite possibility. The situation is horrible.
You mean your 100k. Since that's all you're putting in. Renters will lose everything else they put in. The 400K will be locked in until you sell. But, you can always get a HELOC for 20% of the value of the house.
@@markg-jw2hx yet if the price of these 600k houses drop to 440k, these homeowners will lose much more than what renters put in. Or if insurance doesn't cover the roof, etc cetera
I can only imagine being part of a generation where home ownership wasn't only for the exceedingly privileged or lucky. It sucks how many people have basically no choice but to rent until they die.
@@Fishfood007 Firstly, I don't live in the US. Housing prices are in a horrific state all over the world; the US isn't special on that front. Secondly, "just move" is such a grossly oversimplified solution it isn't worth considering. There are dozens of reasons for moving to not be an option for a lot of people. Don't be dense for the sake of being dense. It's a bad look for anyone.
@@VirusVescichetta Might not be trying to be dense. If other things are more important to you than home ownership, great! Lots of people through world history have moved for COL/opportunity reasons, sometimes leaving family behind forever. It's worth at least considering.
As a life-long renter, I have always thought of my rent paying for my mobility. If the building where I live falls apart, or if the neighborhood takes a downward slide, I can simply pack my bags and leave. The worst that can happen is that I lose my security deposit. But if I owned a home in a neighborhood that started to decline in value because of crime or some other factor that would make it less attractive, I would need to find a new buyer to sell my house. And depending on the the cause of decline, that might not be so easy. I could be forced to sell my house for just enough to break even... or maybe even less than what I paid for it. And in an unstable economy such as what we presently have, home ownership may not be the most prudent investment.
This video is balanced and almost exactly independently verifies what I calculated for my parents that are needing to downsize their large house to extend their retirement nest egg. The fact that Ben Felix is one of your sources is another huge witness to this objective video. Well done and methodical
Not sure if this has been mentioned, but as far as the opportunity cost of sinking 100k into the s&p at 7% compunded over that 30 year mortgage =761k. Not to mention the "opportunity cost" of being limited on mobility i.e. better opportunities elsewhere or shopping for cheaper rents in changing needs. Moving closer to job opportunities. Freedom to relocate to lower cost areas or higher pay jobs etc. Just food for thought. I would assume a good portion of buyers wouldn't stay in the same house for 30 years to take advantage of the amortization interest curve, or be roped into a refinance after
@@humphrey 1) Intangible happiness and satisfaction of owning/being fully responsible where you live. 2) Greater freedom in planning and designing updates/renovations/etc. 3) You're going to be paying to live somewhere anyway, so you might as well keep in equity some of the money you spend. If you can afford it or it's feasible of course. You're still paying property taxes, updates, utilities, etc in your rent, it's just hidden and not your direct responsibility.
That spreadsheet is super nice to tinker with. Considering I'm someone who is still at the stage of their life where renting is all that really makes sense, this video is more of a helpful tool when it comes to road mapping my future plans rather than any current decisions I'm making, but it's super important nonetheless! Great video Humphrey!
Hey, great video! But there is a key missing component from the opportunity cost: houses are leveraged assets! A 2% return on home price with 20% down is equivalent to a 10% return in the stock market, because you have 5x leverage. And its equivalent to a 57% return on the 3.5% minimum down for FHA loans (100/3.5 = 28.5x leverage). That leverage changes over time as you gain more equity, but early on its relatively flat because of the amortization schedule.
I imagine the 7% comparison in the video is just putting your down payment in a managed broker, or an index fund tracking S&P500, with no leverage. As soon as you make the comparison against a more involved trading situation, it's no longer a heuristic.
Looking around it seems like historical average annual real estate returns are anywhere between 1% and 6%, but the last couple of years have had on the order of 20% spikes, so expecting more significant increases in the near future seems unwise. Not to mention, we are approaching new records and thresholds in housing affordability and availability, along with new-ish wide-scale real estate investment situations (record corporate ownership). As paired with every piece of economic advice: past results do not guarantee future results.
4:43 you are missing the leverage in the calculations that you get with the mortgage loan. If the property appreciates by 2%, you make money on the value of the home not just on the down payment. So 2% will be $10,000 compared to 7% on S&P 500 with 100k investment.
Another factor many don't account for is rental inflation over 15/30 years where a mortgage stays flat assume its a fixed rate which it should be. After the mortgage is paid off (which it will eventually), rental payments will always continue. Simple way to think of it, short term/mid term, pros and cons for each will vary, however in the long term, you save more buying.
I think for maintenance costs you should save 1% for every decade & 500k of the house. So if your home is worth 500k and is 10 years old, save 1% every year. If your house is 750k and is 15 years old, save 1.5% (1% for first 500k and 10 years + 0.5% for next 5 years and remaining 250k)
Bought our home for $310k in KS in early 2019...it is now worth close to $500k and our rate is 2.375%. If we had decided to wait buy a house today, our payment would have went from $1550 on a 15-year note to about $2900ish house payment on a 30-year fixed. 🤯
Love the video and a great starting point rule. I did choose to buy even though more expensive because of forced savings and knowing mortgage payment does not change, both of which you mention.
All signs suggest that 2023 will be a year of severe economic pain, I was really hopeful of my investments this year, but I followed some stocks suggestions that didn't go so well, I've been studying the stock market and I realized some investors made millions from the recent recession and I was wondering if such success rate could be achieved in this present market. and the Federal Reserve taking a more hawkish approach to interest rates.
hrow it into AI stocks / Hold some in gold. I feel exceptionally lucky I started investing in my early 40s and consistently compounded my income to create more cash flow. I built a 7 figure well-diversified portfolio just by following my F.A Trisha Jean Webb's recommendations and having exposure to different prolific investments mainly blue chip stocks, an allocation fund, S&P500 and coins.
I recently sold my home and, at 80 years, have moved into a luxury high rise1 bed apartment in Raleigh. The 1650 monthly rent is $520 less than my mortgage was. My apartment is across the street from the main bus terminal, so I ride for free as a senior and I can get just about anywhere I need to go by bus. So I save another $400 in car expenses. Therefore, those savings make up more than half the cost of my rent. Being in a very nice apartment I have maintenance free if I need it and access to a swimming pool and a gym and a game room and a BBQ area. I look forward to a very nice years I however many I have left. And I am not alone. My son lives10 minutes away my buddy family is 20 minutes away and my volunteer family is15 minutes away. I look forward to some satisfying and pleasant years.
This rule of thumb is good for a short time horizon of under 3 years. After that there are too many changing variables for it to remain helpful. The biggest factor in the rent vs. buy decision in the medium-term is the rate of home appreciation. I would generally not recommend putting 20% down unless you have really bad credit. We were able to put 5% down, saving us $45,000 on a downpayment and our PMI is $50/month (This was in 2021 so frankly a lot has changed). If localized appreciation is high in your area, your mortgage is leverage on your return of ownership. Our home has appreciated ~ $40,000 in 2 years, which is already double the amount of our down payment + closing costs. And I was able to leave the remaining $45K in the market so I managed to lose a lot of money on that ;)
@trenthorton9, Your home HAS NOT appreciated $40,000 in two years. 100% Fact your home DEPRECIATES 3.636% every year. The IRS even says it does. Google it! 10:07 A home never ever goes up in value. For a home to go up in value, you MUST spend over 4% in maintenance and repairs every year. If a home just goes up in value, there would never be any reason ever to replace or fix anything in your home! Ever! Right? 100% Fact! Everything in your home will eventually need replaced! This makes owning a home a bad investment compared to renting.
Technically your primary residence is not an investment, it is a liability, as it takes money out of your pocket, not into it. A better comparison would be a rental property vs the stock market. Make sure to factor in the tax benefits of a rental property and how that can offset W2 income
And you're technically wrong. A primary residence is an Asset because it provides a useful function. The paid mortgage principal goes into Equity because you now own that part outright, the paid mortgage interest and other fees that you'll never get the money back out of are Liabilities. Just because something has recurring expenses or costs more to maintain than it's worth over the course of a lifetime doesn't turn an asset into a liability in terms of accounting / finance, because if it still has use it's an asset with offsets of liabilities and equity. Now, depending on tax breaks, etc, it may be better strategy to have a rental property due to other benefits like you said, but you're simply wrong about the liability part. Might as well recommend depreciating land next and see where that gets you
@@hamartian_7979 those are valid points, but the main premise of my statement was more around the framework of comparing assets that actually give you a positive ROI, like what paper financial assets i.e. dividend stocks, bonds, etc provide vs a rental property etc. While I agree there is some equity you build, your primary residence does not provide a NET positive ROI on a monthly basis, so in reality it is a technically a liability. As such, the comparison between a primary residence and index and paper equities is flawed. If you are not getting positive cash flow on a monthly basis, it’s a liability. That is universal, it doesn’t matter what it is, regardless of the function you get out of it.
It's like saying a car isn't an investment but a liability. How are you get to work then? Walk? If you have a car, suddenly a lot of money making opportunities open up compared to walking. So, then it becomes an investment. Similarly, you have to spend money for housing. The choices are rent or buy. Comparing to rent, a house is an investment.
@@markg-jw2hx spoken from a car guy with multiple cars, cars are liabilities 99% of the time. Unless you are really savvy and know what cars will be sought after and in short supply in the future, and can actually sell at a profit ( including deducting maintenance from your profit). Function does not make something an asset, Cash flow does. That is my main point. You guys are focusing on the leaves and missing the forest
What got me when I was younger was value vs cost. When viewed per square foot, or per features homes are generally waaaay cheaper compared to renting an apartment. And that over time a larger portion goes towards principal, making a house a super inefficient savings acct vs "burning money" by renting. It was enough to force me into buying far sooner than I should have. Waiting another 2-3 years would have put me in a better spot overall because of everything stated in this video. Plus the issue of uncounted costs. If you are renting, you aren't going to dump money into improvements or customizations, or maintaining everything to as high of standards. And because rentals are typically smaller, there is less to maintain in the first place. This becomes a huge sink that home owners don't typically admit to.
Your explanation is realistic and straight to the point. l watch several video's on how to trade in the market but haven't made any headstart because they are either taIking some gibberish or sharing their story of how they made it. And l don't want to make mistakes by taking risks on my own
Think from the emotional side... Owning a house is a big accomplishment. It provides a sense of achievement in life, as well as a free space of your own, a sanctuary. Go for it if you can afford it. Worth it.
Great content. I also first heard of this concept from Ben Felix and I have been wanting him to put out an updated version to reflect current realities (I also live in Canada). Thanks for adding to the conversation. Side note, it's funny how many times I've tried to explain this concept to friends or relatives whenever people ask me when I'm planning on buying a house. I'd say 99% of the time it's met with a blank stare and I get told I'm crazy for thinking renting is better than buying in my case because it's "dead money". I'll usually explain the math and the concept another time and again get met with resistance. The takeaway is in Canada (likely most places in the world) the idea that buying a home is better 100% of the time is so ingrained in our minds it is hard for people to seriously consider this idea objectively. FWIW I live in a very luxury market and rent my place for $900 all costs accounted for. If I were to buy in this area my monthly costs according to your percentage rule would be around $3000 a month. Cheers.
A nice updated video! Though there's a few assumptions that kindof tip the balance in favor of renting, you covered the straight line interest effect, but another big one is: You didn't account for capital gains taxes. When shares are sold you'll be taxed on the increase in value, and on any dividends paid, where a house you live in will be sold without any capital gains. That 7% gain on market is much closer to 4-5% after taxes.
Good starting point. Items to consider to improve true costs: You left out the cost of home owner's insurance. Closing costs should be amortized over the life of home ownership. It wasn't clear if the price appreciation was after inflation, which doesn't seem likely. You can actually lose money on home ownership. I basically broke even on 4 properties owned over 30 years. The real ownership plus for me was I was able to modify home to meet my needs as family needs changed.
@@joenunez938 my property I bought for 200k is now worth 900k in 23 years. Not sure how breaking even works over 30 years. I guess it’s the new math being taught? 🥹🤓
Good video. I consider maintenance fees the cost of things that break down, like the AC or refrigerator, roof leaks, plumbing leaks, etc. . So I suggest you also add other required home costs. Those include home insurance, HOA fees, pest control and lawn maintenance fees. Yes, keeping the lawn green to keep up with the neighbor's lawn is several thousands per year. If you have a pool, add that also.
PSA: Don't buy a home in an area with a HOA. I realize that might be tough in the USA, but luckily in Canada HOAs are still pretty uncommon. HOA rules can be draconian and can really scr3w you.
I own now and I have rented before but I personally prefer renting, life seems to be more fun when you rent, it's usually in a better area and you get to have a gym,pool etc.. don't have to worry about maintenance and you have the freedom to pick up and go anytime you want, also owning means most or all of your money is in the house, if rent prices wouldn't go up and was like a mortgage fixed for many years I would 100% rent.
I bought an older home (1956). The previous owner tried to do everything themselves so lots of things are held together with gum. We’re spending about $500-1,000 a month fixing things. On the long run it’ll pay off but in the short, owning is DEFINITELY not cheaper than renting. Don’t go in thinking that or you will lose your shirt.
Do they just break on their own? Maybe it is because you are overusing your home appliances? Showering and watering too long, leaving electricity on when not needed, flushing the toilet too much. Maybe opt for a grass-free garden, change your landscape to natural native plants that are drought resistant. Live a minimalist lifestyle. Why do you incur high costs with fixing things?
@@bryan_witha_whyy Well, I rather buy nothing for this reason. I still do not understand how things just break down. Maintenance and having things are a headache because they become part of your life. Hence, why I always hear my damn neighbors everyday just working on their homes. The noise of machinery for me is sickening when I was in the US. Do you live in a high maintenance home? I try to avoid those when I will buy a home. In Japan, homes do not break down but we also live minimally and smaller homes.
@@jacqueslee2592 Things break, mechanicals need parts. A house takes a beating. It takes work and money to keep it up. That’s why I think most people should just rent.
There is a very key error here at around 4:40. The real estate return home price return is 2%, but the stock market return is 7%. But you have to multiply the down payment by the leverage. So if you have a $100,000 down payment on a 500,000 home, what is growing at 2%? The home price! Not the down payment. So .02 * 500k is 10,000. That means your investment went from 100,000 to 110,000, or 10%. So the true return on a home is 10%, not 2%. This matters a great deal.
this is absolutely true. however, if you want to keep an apples to apples comparison then the renter needs to be given a $400,000 investment loan to match what the owner gets. This obviously seems very unlikely in reality. The real argument here is that a mortgage makes available HUGE leverage, that a renter otherwise wouldn't have access to.
@@iownahahaNot only that, but you also need to factor risk into the equation. There is significantly less risk in the S&P500 then there is in a piece of real estate that is leveraged 5x. Risk adjusted rate of return is what should be compared.
The opportunity cost needs to be adjusted to only reflect the difference between the returns of the property versus what you were expecting from another opportunity. You also have to realise that your deposit is considered leverage to give you access to earn returns on money that isn’t even yours
I love that Humphrey addresses the emotional component of the avg individual. A few things that finance ppl don’t address are: ability to renew lease is in most part dependent landlords renewing. Even if you are a wonderful tenant, your landlord may still need to sell and unable to renew your lease. Time/emotional/financial cost of looking for rentals, financial/time cost of moving every 2-3 years.
Nice video - you forgot though that the financed portion of the home appreciates, too (not only the portion your downpayment paid for). So even with mortgage rates at 7%, you should calculate 5% (7% mortgage rate - 2% appreciation).
Being Canadian for me I knew it would be more expensive to buy then to rent but I also knew that as I pay down my mortgage, rents keep increasing Now 20 yrs later my monthly expenses reduced by half while rents more than doubled It’s all a matter of your own personal point of view & what you’re comfortable with :) Also, if you sell your principal residence for more than you bought it the difference is yours tax free, vs. putting that $ in the stock market will be fully taxable depending how it’s placed of course
There is also the annual rent increase of your apartment or house that needs to be considered. Rents have risen crazily in last 3 years and will continue as the housing demand persists. This is a big variable that is being omitted. Also need to consider cost of moving between apartments etc as not everyone stays put in same place for years together
Wow this is pretty accurate. We recently purchased a $440k home and with all the repairs, taxes, insurance and utilities your estimate came really close to just about what our monthly spend is. Your calculation gave me $3.2k per month and that's about where we're at.
As a home owner, this calculation is very useful. One thing to consider as well is that while renting, most likely, you won't have many utilities to pay. When you own the property, you have to pay for everything. That also varies depending on whether you own a condo or a house.
2% per year for maintenance seems very high based on my experience of owning an older home. I've had plenty of issues I've had to work on but definitely not that much. It also implies that houses only ever break even because your 2% return on investment per year matches your 2% cost of maintenance ownership.
It's average over time and with fixer uppers included. Roof goes out, foundation bad, siding replacement, electric reinstall, etc. That'll all go well over 2%.
Also, I think you can rent a place for less than what you would pay for mortgage for that specific place you want to live in etc… but of course both have pros and cons:)
Don’t care what anybody thinks. Owning will always trump renting a property. I dream of the day I can stop wasting my money renting and I can have a fixed mortgage payment for 30 years… A fixed mortgage is the most powerful weapon against inflation and the rising cost of living. I’ve been in my current apartment for 3 years. My first year I only paid $1400 for a small 1 bedroom. Today I’m paying $1750 for the same unit…. To renew again my apartment wants to raise me to $2000 within a span of 4 years. Owning is a must at this point. Don’t even get me started on building equity for doing nothing but living in a home…
Another thing to consider there is generally no income tax on appreciation of home value where as if you are investing your money instead of putting it in home equity that is taxable for income tax.
There's a major factor you're missing. Mortgage Rates(MR) are what they are because interest rates (IR) are high. IR ALSO AFFECTS STOCK PRICE AND HOUSING CAPITAL VALUES!!! so it's not quite an apples to apples comparison.
If I were a landlord renting out homes I'd definitely include property tax, home owners insurance & extra maintenance fees in the rent; the renters will cover those cost. I don't get why people don't get that.
Your spreadsheet should add the average rent increases per year. Time the person plans to live there, say 5,10, 15 etc…then the total cost rent vs buy after you sell your home after some time.
I’m also including the fact that I own more of my house every month. I locked in my mortgage below 3%, so I can never move. But thank you for making this video!
The biggest problem i see is if you rent for 30 years, youre still paying rent. Whereas after 30 years of paying a mortgage, you no longer have a mortgage. If you continue to rent, thats a cost that must be considered. If you then buy a house, you just burned 30 years of income for nothing. Retiring with rental or mortgage bills isnt realistic.
The example assumes you would be investing the amount the home owner is paying toward principle every month as part of his mortgage payment into the stock market at 7% returns for 30 years. The renter pays higher expenses, but gets a better return in the stock market. The home owner pays lower expenses, but gets less appreciation on their home equity.
Most of your unrecoverable costs are permanent. Property taxes don't suddenly have residual value after your mortgage is paid down nor does maintenance. The opportunity cost on your original downpayment also continues to compound. The only element that goes away is the cost of debt and in normal times with normal interest rates that delta isn't exactly day and night.
This was a major factor for me when I bought my first home 30 years ago, and something I'd remind my friends when they were thinking of buying their first home. But the new tax structure has a much higher standard deduction (26k for married filing joint). Most young people looking to buy their first home probably aren't going to be over the new standard deduction unless they have a huge mortgage or already had an unusual amount of deductions at that point in their lives. So, they might not see any change to their taxes even if they're paying 10-20k in interest and property taxes. Interest rates and taxes are up... but people should factor in the standard deduction to know how much tax benefit they're realize.
I think this depends on demand for rentals where you live and interest rate. If renting is quite cheap compared to owning, there should be a drop in demand for renting out apartments and rather sell them as you loose money. This should drive rent up again to balance it all out.
I feel like one thing people aren’t talking about is all the repairs to keeping your home up to value and the amount of money you have to put in especially if you plan on moving out. For example, you need to buy a new roof that’s 20k you no longer have and since you don’t plan on selling the roof that isnt going to be an asset you cab liquidate
One thing that’s not considered is that the locale in which your fixed investment/home can change drastically. Neighborhood preferences can shift very quickly. Once pristine neighborhoods can become “blighted” and unsafe for a retired elderly person to live in. The blighted value of the property diminishes greatly and becomes a difficult item to market.
One additional and very important cost not considered here is the Closing Costs, running at a hot 3-5% for a buyer that can really tip the scale for the first year of ownership esp.
@すし The HOA covers maintenance outside of your unit, that’s not included in the 1%. My insurance alone is more than 1%. I think there should be a line for the utilities that renters typically do not pay, such as water and garbage removal unless that’s included in the 1%.
What most people don't calculate in this equation is that you basically live rent free once you payed your mortgage. If you buy a house around 30, and pay a mortgage for 30 years that means you can live rent free during your retirement, which is worth A LOT, when you ask me.
Thanks for this video. I’m somehow closing on my first home in VHCOL with high interest rates in a sellers market lol I actually think it was a good time to buy for me because the high interest rates have really eaten at the demand and priced out some competition. Pretty sure this home I bought would go $50k-100k over asking just a year or 2 ago with no contingencies but I was able to come in under asking. Plus if I just caught a temporary hike in interest rates I can always refinance and basically pocket the money that would be needed to outbid. If interest rates keep climbing I’ll be glad to have that 6.125% rate which already is starting to sound more and more palatable with where current rates are at.
This is by far the best renting vs purchasing house video I’ve come accrossed. Humans are not rational is something that I read in psychology of money and that is so true. As I just purchased an apartment last year (in the Netherlands), knowing how much I am paying per month is a sense of security on it self, ar least for me. I also get tax benefit which I will obtain in a couple of months. It’s good that you touch all these points as well because I don’t see many addressing these.
9:22 true, amortization reduces the amount you pay towards interest, but there is still an opportunity cost for continuing to pay down the house or even own it at all (relative to investing in other assets). That exists even when your house is 100% paid off. Still, that opportunity cost may vary significantly and depend on human behavior, of course.
