Quote:
Originally Posted by ADL Colin
Most people don't account for inflation and the cost of your mortgage (assuming you have one)
If you buy a house (sorry, Peaches) and:
Get a mortgage at 6%
Your home appreciates at 5%
and there is inflation of 3% per year
You have lost real spending power even though your house is worth more money in the end. When the average person has a mortgage rate of 6% and goes against inflation of 3% they have a decent hurdle to beat in actual home appreciation. I do agree with Peaches you should consider what you would have spent on rent.
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Yes you should consider what you would have spent in rent.
Rents go up every year to keep pace with inflation (or more)
Once you buy a house and lock in your mortgage rate it's set for the duration. Renters will have to spend more each year for rent (or possible the same percentage of their income on rent) while the person with the mortgage pays the same amount, or a lower percentage of their income each year (making the standard assumption that wages will rise with inflation)
So the person with the mortgage actually has more disposable income, or more money to invest elsewhere than the renter does.
This conversation is so ridiculous I can't believe we're actually having it. People who think renting is a better long term financial decision than buying really need a course in remedial math.