Quote:
Originally Posted by redpoint5
The risks aren't equivalent. The odds of losing all rent money is 100%. The odds of losing less than 100% of mortgage payments high.
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Of course. But it's not just the mortgage payments. Putting down a downpayment is a lost opportunity cost that you could have put down somewhere else. It's also a risk.
If a $100,000 home has mortgage payments of $513 per month and rent is $700 but you paid $20,000 in down payment, in the first year you'd have lost $8,400 if you rented but you'd have invested over $26,000 if you bought. That investement is also a risk you could lose in a catastrophic event, and is a loss most people wouldn't be prepared for. The renter just finds a different place to rent if his house is attacked by a neighboring country or something.
Also, in 2008, for an example, I knew people who had to move but owed more than their homes were then worth. So in order to sell, they had to pay. So they lost more than 100% of their mortgage payment.
You also lose 100% of your mortgage payments if you die before you resell your home and never rent it out.
Of course there is the benefit of not having neither a mortgage nor rent after you pay off the house 30 years from now. But a house is both an investment and a risk. And the investment with the downpayment is an opportunity cost that some people may have faired better using somewhere else.
Not that buying isn't the right decision for most people. But it's not the be all end all path to financial security either and could be a wrong choice for some or not make much finacial difference for others.