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A 30-Year Trap: The Problem With America’s Weird Mortgages
(www.nytimes.com)
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this post was submitted on 19 Nov 2023
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You can also get 15 year loans with fixed rates here in the states. They’re usually .1% better on the interest rate compared to a 30 year, so for most people it doesn’t make sense to go with a 15 year when you can pay substantially less on a 30. Plus homes here are very much a very safe investment. When you own the home you only pay property tax generally after you pay the mortgage and in states like California that can mean an incredibly cheap place to live once paid (I’m talking 100s of dollars a year, though that will go up over time).
People bitch about housing here in the states, and it’s definitely not as good as it once was, but it’s also not as bad as many other places. I travel to Canada regularly and their shit is fucked. 😅
This is actually a significant cause of California's housing crisis.
Are you saying that people living in the homes that they own are causing the housing crisis? Or what?
Yes, absolutely, in California. Generally, everywhere too but that's a much broader topic.
In California specifically, property tax costs are based on the grandfathered price of the house, which means that there are people who inherited homes bought for $30k 80 years ago and still pay that amount of property tax.
This traps both the taxable value of the house and the land itself and keeps it from being developed, when normally someone might be priced out by the taxes a $10 million home would generally cost.
https://www.sfassessor.org/tax-savings/exclusions/reappraisal-exclusion-grandparent-grandchild
It's just one of many reasons (which is why housing costs are insane everywhere), but it is a significant contributor in California.
Generally, the law being written to benefit homeowners is the single greatest cause of our housing crisis, and this is one element of how those laws are crafted toward existing homeowners.
Consider: if homes are "nest eggs" that always go up in value, what is happening to the price of homes, all the time?
Kind of yeah. Prop 13 definitely is part of the issue.
Well that's ridiculous. What do you expect people do to, just give up the house they live in for someone else who needs a house? This isn't Palestine, it's the USA and we are well within our rights to keep living in the homes we paid for.
Love the fact you ignored maintenance cost, incidental repairs, house insurance, and all that. Then you proceeded to sneak in that bullshit at the end.
It’s still quite a bit better than renting. Rents around here cost more than many mortgages.
Don't forget maintenance!
Maintenance is a thing but it's also not "that" frequent, distributed over the course of multiple years, where something of note probably only occurs during 1 or 2, you save. There are totally scenarios where renting makes sense and there can be financial barriers to entry on onwership, but as a long term gambit, if you can afford it, owning wins.
Home insurance isn't required in all states. Usually it is the lender that requires. Of course it's still a good idea to have it.