The Home Ownership Thread

[jbarwick]

We are higher than 10% but on a 15yr mortgage and not a 30yr. I didn't feel like having a mortgage into my 60s....

 

[Kappelan]

Our mortgage payments with insurance and taxes about the same that we were paying for rent. We did some upgrades too of course. But our home's price doubled itself in almost 5 years. So we have a profit already. Also we got a pre-construction condo closer to the City as an investment. Will see how this one will work out.

 

[Fueco]

My mortgage payment (including taxes and insurance) is less than 10% of my gross pay.

My mortgage payment (including taxes and insurance) is less than 10% of my gross pay.

Is your income near average for where you like, or is it substantially higher?

Where I live, 10% Of average income would be $6000 per year. There might be a closet somewhere in town that rents for that little, but nothing livable would be anywhere near that cheap.

 

[Fueco]

Our mortgage payments with insurance and taxes about the same that we were paying for rent. We did some upgrades too of course. But our home's price doubled itself in almost 5 years. So we have a profit already. Also we got a pre-construction condo closer to the City. Will see how this one will work out.

Our mortgage payment is slightly more than we were paying in rent until 2016, mostly because we lived in pretty cheap rentals.

 

[brokencycle]

Is your income near average for where you like, or is it substantially higher?

Where I live, 10% Of average income would be $6000 per year. There might be a closet somewhere in town that rents for that little, but nothing livable would be anywhere near that cheap.

My income is higher than average for the area, but the average doesn't tell you much because there is standard deviation in income is so high here. I paid about the median house price when I bought, but housing here has been going nuts - we're up ~10% before any renovations in 2 years.

I put 20% down on my house, and I took out a mortgage for less than a third of what the bank said I qualified for. I'm not saying it will work for everywhere, but you asked the question, and I answered. Obviously, it is a much higher percentage of my net pay, but we're prioritizing paying off student loan debt as fast as possible because that is a higher interest rate and not tax deductible.

 

[Fueco]

My income is higher than average for the area, but the average doesn't tell you much because there is standard deviation in income is so high here. I paid about the median house price when I bought, but housing here has been going nuts - we're up ~10% before any renovations in 2 years.

I put 20% down on my house, and I took out a mortgage for less than a third of what the bank said I qualified for. I'm not saying it will work for everywhere, but you asked the question, and I answered. Obviously, it is a much higher percentage of my net pay, but we're prioritizing paying off student loan debt as fast as possible because that is a higher interest rate and not tax deductible.

My primary point is that if your income is high enough, you can afford to pay less than 10% of your income in mortgage/rent. 95% of the people will never be able to do that.

The median house price here is $720k, and the average household in come is just over $100k. You’d have to make a whole lot more than $100k to pay less than 10% into your mortgage.

 

[jcman311]

We are higher than 10% but on a 15yr mortgage and not a 30yr. I didn't feel like having a mortgage into my 60s....

Our old mortgage was a 15 year, but new home is 30 year. Where else can I borrow at 3.5% and have investments earning 8%?

 

[brokencycle]

My primary point is that if your income is high enough, you can afford to pay less than 10% of your income in mortgage/rent. 95% of the people will never be able to do that.

The median house price here is $720k, and the average household in come is just over $100k. You’d have to make a whole lot more than $100k to pay less than 10% into your mortgage.

I did a quick search and there are houses on the market for $100k in the city of Boulder. They're small, and I don't know anything about the area, but they exist. Boulder, from my limited knowledge, seems like an odd market similar to Madison or Ann Arbor or other medium sized cities that have a big university which seems to drive housing prices very high relative to the area.

There are a lot of markets that it is difficult to do, but not all markets. I wouldn't expect you to be able to do it in the Bay Area either, but there are a lot of cities in the Midwest and South that have very reasonable housing costs relative to wages.

 

[Gibonius]

The general rule of thumb I've always heard is 30%. 10% seems like it's only really accessible if you have pretty high income. Median rent is $850/month, so you'd need to be at >$100k just for a median apartment.

I did a quick search and there are houses on the market for $100k in the city of Boulder. They're small, and I don't know anything about the area, but they exist. Boulder, from my limited knowledge, seems like an odd market similar to Madison or Ann Arbor or other medium sized cities that have a big university which seems to drive housing prices very high relative to the area.

There are a lot of markets that it is difficult to do, but not all markets. I wouldn't expect you to be able to do it in the Bay Area either, but there are a lot of cities in the Midwest and South that have very reasonable housing costs relative to wages.

Boulder has the university and a couple research labs. It's also just a weirdly geographically confined city because of the mountains, lakes and parks.

 

[otc]

Where is this magical place where one can spend only 10% of their income on housing?

FWIW, I am mostly joking about the financial independence and/or frugality bloggers. If you spend more than that, you're just trying to live too luxurious of a lifestyle. You need to find cheaper housing and get a side hustle in order to get your housing expense down!

That being said...I live in Chicago and actually have paid around or under the 10% mark for many years. But that's because I've got a decent income and have been fortunate with my rentals...which I am happy with, but are certainly not at the top end of the market. I certainly know a lot of people who make less money than me but pay significantly higher rents.

If I were to buy a place...I'd also end up spending a lot more money given that I'd be buying to accommodate expected future needs. I certainly wouldn't be in the position where my mortgage ends up coming in below my old rent (and that's not even including maintenance). Hopefully the lady would be chipping in for that too though...heck, if she were paying her fair share now, I'd be at less than 5% of income on housing which is nuts.

 

[jbarwick]

On the 15yr vs. 30yr debate, I am not worried about the additional investment earnings over the same period. It is more of the mindset of not having a mortgage at 45 that is appealing. It gives us flexibility.

 

[Gibonius]

FWIW, I am mostly joking about the financial independence and/or frugality bloggers. If you spend more than that, you're just trying to live too luxurious of a lifestyle. You need to find cheaper housing and get a side hustle in order to get your housing expense down!

I laugh when the frugality bloggers end up living with their parents or some ****.


It's one thing if you're introducing multi-generational living as a way to use scaling to keep costs down, but most of them are just mooches.

 

[Piobaire]

My primary point is that if your income is high enough, you can afford to pay less than 10% of your income in mortgage/rent. 95% of the people will never be able to do that.

The median house price here is $720k, and the average household in come is just over $100k. You’d have to make a whole lot more than $100k to pay less than 10% into your mortgage.

The thing is you moved the goal posts. Your initial comment was asking for a magical place where 10% cuts it. When several folks chimed in that's their ratio you started adding other criteria.

FWIW, we're a little over 10%, like 12% or so to include taxes and insurance, on the required payment but are tossing in at least an extra 2k every month. Have our LTV down to about 21% and plan to have it paid off in four years.

It would be within the year if I didn't just drop 150k cash into the backyard.

 

[Fueco]

I thought it was a safe assumption that we were comparing median household income to median house prices.

Sure, I could live in a mobile home in Boulder on the median income, and come closer to 10%, but would I want to?

I could also live in my van, down by the river, and spend nothing on housing.

If we aren’t comparing median/average, comparisons are meaningless

 

[Piobaire]

I thought it was a safe assumption that we were comparing median household income to median house prices.

Sure, I could live in a mobile home in Boulder on the median income, and come closer to 10%, but would I want to?

I could also live in my van, down by the river, and spend nothing on housing.

If we aren’t comparing median/average, comparisons are meaningless

See, I figured the 10% was predicated upon people living below their means as calculated by normative figures.

To the part I just bolded...most FIRE type thinking is predicated upon that fact that the smart players will endure something just like what you've said here to get FI.