Why do people congratulate people who get a mortgage?

[Anonymous]

It's probably one of the dumbest things that you can do. Congratulations for tying yourself up into a house that you won't own for the next 2 or 3 decades.

[argot]

No clue. You don't own the home until you satisfy the mortgage. The bank owns it and you are now indebted to them. The bank requires that you maintain a mortgage escrow account as well to arrange for the payment of property tax bills, homeowners insurance along with other policy option potentially covering flood insurance, or windstorm insurance, etc. You will likely never make a claim on any of these insurance policies, but you are now obligated to pay if you want to continue to live in the banks house. Furthermore, those insurance companies will have their own demands for you. They will tell you that when your hot water heater, your homes roof, or the electrical wiring gets to a certain age that you need to replace them. There could be nothing wrong with those pieces of the home... They could work perfectly fine, but the insurance company will revoke your policy if you don't get work done, and if they don't insure you then the bank will foreclose on you for not carrying insurance. People don't really think it through. They see a house and at the time they sign the contract all they really care about are the monthly payments. It's a form of financial debt slavery and people pat each other on the backs over it.

[NaultD]

Commitment. Devotion. Long term investment. Family life, having kids things like that.

I got a condo at 24 and I called it a savings bank account that I can sleep in compared to renting. I get it's not for everyone. I made the most of it. i got the cheapest intrest rate you could ever get ever just before covid 19 closed everything.

It is intended to be the lowest interest rate you'll ever find as a normal person. Make the most of it. Even for retirement if your morgage is lower then 5% it's better to invest in the stock market then paying off your mortgage. That is the opportunity to do so.

[NaultD]

I even forgot tax exceptions of the single home being your home is a thing then the morgage intrest is also a thing.

It's not for everyone but if you can get your money to work for you it can drive itself at times... then zoooom

[Anonymous]

I've never heard anyone congratulate anyone for getting a mortgage, but it doesn't matter if you don't own a house outright, ever.

You're looking for an increase in value, and move it into a higher-priced house, and keep doing that until you want to cash out.

The mortgage is just a tool to make that possible when you couldn't otherwise. You can also go into income property if you wanted to.

Since 2019 a $150,000 house would have gone to around 400,000. If you moved that to a $400,000 to $500,000 house it would be worth $750,000. And so on.

You can make millions that way, so if you have an ordinary income of $150,000 or $200,000 a year, you can really do well, and if you're 24 now, with a house you could probably retire when you're 40 or 45 if you wanted to.

[Yabbut]

If you don't buy a house, and you rent, you'll likely pay more per month and walk away with nothing. At least with a mortgage, at the end of the 15 or 30 years, you have a whole home to show for it. Now, paying cash for a house, of course, would be better.

[BoopBoopBeep]

@yabbut Arguably, depending on rates at the moment. I bought one house cash because rates were at 7%, my primary house I got at 3.25%, which allowed me to keep the capital in other investments yielding more than that, so I'm basically getting paid the 3.75% spread (on say, a 7% return) to finance rather than pay off in cash. Rates being much higher now, that's a touch more risky, but 3.25% isn't hard to beat anywhere.

[HighValue]

In my opinion, the better option would be to buy a NEW mobile home because you can get a good quality home for less if the person doesn't insist on a huge, oversized and overpriced one. Then they could pay it off sooner, and if they get a job in another city, they can have it moved there for around $3,000 +. Where as when buying a house, it severely limits where they can work (travel distance to work), and if they sell it and buy another one of equal value, they actually lose money with realtor fees. Tags for a mobile home are also much less than property taxes on a house.

If they do their research to see the size standards for placing the mobile home on land with a permanent foundation, they could get that size so later on they could purchase land after the mobile home is paid off and have it permanently placed on land when they retire and don't need mobility for potential employment.

[NaultD]

Don't listen to this person "mobile home" you know your local trailer park. The fact he mentions good foundation and mobility? This is a crock of shit.

[BoopBoopBeep]

Mobile homes are a depreciating asset. There's a reason we aren't all paying primo bucks to move into a trailer park as we get more successful. That's one small step up from buying a time share.

[Soteris]

Well there are two ways to view this. One way is that getting a house (even with a mortgage) is seen as a step forward and indicate their personal success. Another is that it is a fairly good financial decision. Sure, they might spend decades repaying the loan but they are still the owners of the property and the property will most likely increase in value.

[lightbulb27]

never heard that, but maybe people are excited they can buy an amazing home costing $300,000 but pay $700,00 for it in total.

yea the problem is people are not educated...

I did that, had no choice, cost $100,000 and paid $300,000 to the bank. unreal!

[BoopBoopBeep]

I got a 10 year mortgage (better interest rate) that I'm paying off in 6.5 because I don't feel the irrational need to live in a place that's horribly overpriced. I think that realization is bigger reason for congratulations, but outside of that, I think @BarryLiverstone hit the nail on the head.

[NaultD]

What would the 30 year morgage be like if you also paid just 1 additional morgage pre intrest a year? Closer to 15 I think, and 6.5 is still extra high for me.

[BoopBoopBeep]

@NaultD I'm not sure I'm understanding the question. Are you asking about a 30 year 1 point higher than a 10 year? It'd be more than one percentage point higher. I'm at 3.25%, when I got mine the 30 year rate was 4.5%, so 1.25% difference. May be a wider spread than that now. There are tons of mortgage calculators online if you're looking for information on what the actual payments would look like and how much interest over the life of the loan you'd pay and whatnot. I'm not sure. I'm trying to be helpful but I don't fully grasp what it is you're asking.

[NaultD]

Let's talk 30 years at 4.5% interest rate. very fair amount. The 30 years paying 13 out 12 monthly payments (one extra a year) yould extra 15 mouths of payment out of total of 30.

You ultimately would be better off cost wise paying like it is 10 years morgage with the flexibility of a prise structure of a 30 year morgage.

[NaultD]

I went through a dozen drafts and I'm still struggling.

Have the payment and intrest for 30 years on paper and then pay it off like it's 10 and you'll be better off then any 10 year morgage. With some breathing room because life happens.

[BoopBoopBeep]

@NaultD Except I don't need flexibility. My mortgage payment is so far under what I make the only incentive was to maximize the spread between investments and interest. My mortgage payment is handled by my passive income every month. If I'd taken the 30 year option and paid it off in 10 I still would have had the 4.5% annual instead of 3.25, and I see no reason to pay the extra 1.25% when the mortgage was only taken in the first place so I'd have a loan to raise my credit score further. Plus, cost wise, 4.5% over 10 years is still more than 3.25% over 6 or 7.

[BoopBoopBeep]

@NaultD I didn't see your second part until after I posted. I'm following now. I think for a lot of people that would make sense, especially if life getting in the way can throw a monkey wrench in the gears. Fortunately I'm at a place where there's really no wrench that could inconvenience me in that regard. I had a major heart attack almost two years ago. My insurance caps at 4k or 5k/year cost to me though, so I just factor in 5k in expected medical every year regardless. If I suddenly couldn't ever work again, at any job in any capacity, which seems quite unlikely if I'm still living, I'd just go ahead and pay off the house now and be done with it. Got a new roof, new gutters, new windows, new mechanicals and major appliances. Have good home insurance in case something major happens (low deductible there as well). No car payment, no college debt (or any other kind to be honest other than the mortgage), credit cards all paid in full every month. Just don't need a whole lot of breathing room any longer.

[RebelinSteel]

Owning your own house is a big thing in life. Imagine buying a flat at 20, the upgrading to a house at 25, then upgrading to a bigger house at 30, knowing you are likely mortgage free by 40/45 and no rent to pay from 45 to you die, say 40 years of not paying rent and being able to use that cash for other things. Some also get inheritance and can feed in that cash to reduce the time down to say age 35. Mortgage free at 35 years old.

[DextroShade]

As opposed to throwing away money on rent for a place you will never own? Even before you fully own the house you build equity, both by paying down the mortgage and from the property gaining value. Furthermore, getting a mortgage and successfully purchasing a house is much more difficult and complicated than leasing.

[RainbowMarinade]

For most people, homeownership is usually achieved through years hard work. Even more so today than any other generation.
People are congratulated because there have achieved a goal.

[AviatorTom]

The congratulations is for having your own house, not for getting a mortgage.

To clarify... you DO OWN the house, which is collateral for the mortgage loan.

[exitseven]

Getting a mortgage is a big deal for most people. Yes, you have to pay for it for the next 20 or 30 years but it is better than paying rent every month for that same period of time and having nothing to show for it in the end

[ProbablyClueless]

Because it's the first step to owning a house, which is a big deal. Also, a lot of states actually do allow the buyer to hold title to their property (which means they own and possess the property) while they're paying the mortgage off.

[BoopBoopBeep]

Really? That's fascinating. Which are those? What recourse does the lender then have for nonpayment?

[ProbablyClueless]

@BoopBoopBeep The lender secures their mortgage with a lien on the property, rather than simply owning/controlling the property. States that have this are called Lien Theory States. From a practical standpoint, the only difference is that a lender in those states needs to get approval from the court before they can officially foreclose on a property, while Title Theory States allow the lender to foreclose faster.

Here's a list of the states for each type: www.prepagent.com/.../lien-theory-vs-title-theory-by-state

[BoopBoopBeep]

@ProbablyClueless
How fascinating! Learn something every day. Thank you for sharing.

[ProbablyClueless]

@BoopBoopBeep sure thing!

[jahaims]

Do you not understand what investing in an asset like a property with a house on does for a person? It's paying monthly with a return vs. paying monthly with no return on investment.

[gorydetails]

Lol, WTF? It's better than renting where you'll own nothing ever and can't write off interest on your taxes. Thanks for showing the site you know nothing about money.

[goaded]

Yeah, why would anyone want to spend their retirement in a place where they don't pay rent with their ever-diminishing income?

[Anonymous]

As opposed to renting an apartment the rest of your life? I mean what are your other options?

[RavVid]

We congratulate people on a lot of things that seem odd.

[Alex-Snow]

I guess it is mostly to give them congrats on owning a home. Which for some is still the American dream.

[BarryLiverstone]

Because it’s a big step. They now own their own house and don’t have to rent. It’s part of being an adult and taking on decades of responsibility

[AngryCarl]

It's only dumb if you can't afford the repayments.

[Anonymous]

Because they are indoctrinated into the system of making the banks bigger

[Paris13]

It's An Honor With Good Credit. xxoo

[ColHathi]

People do that? I've never heard that.

[jimmy2]

There millions that can't do it