Thursday, February 19, 2009

The world owes us a living

My husband and I have been blessed, so it’s easy for me to talk when we aren’t upside down on our mortgage, BUT I have 3 friends who are:

1 in the middle of a divorce. She hopes to break even, but essentially to avoid loss she's chosen to work together for a little longer.
1 whose house has dropped 30k below their buying price
1 who had an arm and needs to refinance.

So here’s how I see it: Most of us HAVE to pay a monthly cost to live somewhere. It could be rent. It could be a mortgage.

1 - Over 8 years my husband and I estimate we spent 104,500 dollars in rent. We paid an avg of 13k a year to a landlord, to someone else. We didn’t even have the hope of any of it turning to equity. So my friend who lost 30k in equity this past year, still makes out better than if she just paid rent. Why? Because she had to face 20% depreciation this year, but with a landlord she had 100% depreciation guaranteed.

2- Homeowners get to write off their interest. Well heck, for most of my friends that interest is equal to our past yearly rents. So again, maybe some equity is lost, but we get to write off massive amounts of interest. We all owe taxes, so the write off is extra. It wasn't there for us as renters, but the tax bill was. So again homeowner's are ahead of the game even if they were interest only for a short period like one person I know. They did better then renting.

3 – My math is probably wrong, but I am guessing a 200k house at 6% interest means over 30 years you’re paying 560k for the home. So right now the house isn’t worth what you wanted, but look at the big number: for 200k you pay 560k. What’s another 30k loss? Seriously.…. A 30k loss is something people could easily recover just by paying an extra 2 mortgage payments a year, which could cut their total interest bill in half from 360k to 180k so now your total bill is 380k on 200k down from 560k. WOW! That's better than 30k on paper. Can I do 2 extra payments a year right now? NO! Can my friends? No…. but the point is it is all relative. Give it a few years and with effort you probably can. Give it a few years and the house may be up to 230k and you still owe that same 560k or chose to owe as little as 380k. The loss and gain is what you make it, and half of it is all on paper until there is a sale.

4 – The goal of a home isn’t a get rich quick scheme. If we could all get rich quick we would be. Just like if we could all find the miracle diet – we’d all be thin. It just isn’t reality. A house builds wealth because even if you owe 560k on 200k, if you pay it off, you no longer owe. Well, you owe the taxes because death and taxes are the only guarantees, but otherwise the property is yours (unless we go socialist then it's ours). Now imagine a 2k a month mortgage payment. Now you own your home so that 2k a month is yours. It is not the banks, not the landlords, but yours.

A house is a step to financial freedom, it is not a guarantee to massive returns.

Seriously, if you pay off your house and your house DOES NOT appreciate, 30 years later and your house is still ONLY worth 200k, You still have more wealth than you would with rent. You got to write off 360k off your taxes, and you own 200k and you don’t have to pay anyone rent again. You still came out ahead and beat the rising rents and inflation. It’s still a good deal.

My husband and I started renting at 500 a month, by the time we were able to buy, we were paying 1500 a month. That’s what? A 300% increase. We lived in 1 place in VA, 1 in Philly and well 2 in FL, but we didn't upgrade to bigger better addresses. No, the cost of rent just kept rising in step with my husband's cost of living raise each year. It was like clockwork, after 3 years we stopped getting excited about raises. We just said, well our landlord will raise our rent that much and sure enough he did.

Again math is not my gift but come on – NO Appreciation over 30 years and you still do better then rent and have financial freedom. And if your house depreciates from 200k to $0 over 30 years, well you don’t owe anyone, you have a place to live, and you got to write of 360k on your taxes so you’re still doing better than rent.

I understand some of us have to move and some of us get fired, but this really makes me angry, because some of us get cancer, some of us lose a spouse, some of us are always facing very difficult life situations and it stinks. It does, but government bailouts to fogive paper equities. These people have it made. They won the lottery. This mortgage plan says if your house depreciated well we won't tolerate it so we'll just write off your loss today. We, the taxpayer, will just forgive your debt and pay for it. "The world owes us a living."

"What’s next? We have to buy cars to keep GM in bad business? Oh, wait! We just did that in spendulus. I wonder how our med students feel about that? They owe 250k on avg I heard in loans. I know one reason I didn’t pursue my doctorate was the price tag was 100k. Med students work their buts off. Any forgiveness? Nah, let’s just keep raising pay in congress, having Obama fly around in his private aircrafts (plural) because they are the ruling class, it’s okay. Let’s just have the highest business tax in the world – okay second and demonize all business and then get mad when they say enough and leave to go to another country. And like spoiled children we just stomp our feet and shout the world owes us a living.

Maybe some of the unemployed could joing the Military. Not all, I understand - my Grandfather wanted to join but couldn't because of a heart defect, and I doubt the military is hiring 57 year olds these days. There are people who need help, I know. But for others, the military provides cost of housing allowances and insurance. Nah - just keep collecting that unemployment. - Oh, the world owes us a living."

You can't spend yourself out of debt.
& Two wrongs Don't make a Right.