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Home ownership rant

March 8, 2020 - Personal

Socially, Home ownership is almost considered part of the human life cycle; It’s practically ingrained as part of “growing up”. People move out of their parents house, rent for a few years, but then they are “supposed” to buy a home.

Why?

Realistically, the only entity that wins most of the time when it comes to people purchasing a house is going to whatever bank, firm, or entity they use to provide the mortgage loan. If you sell the house, you buy out the banks interest in the collateral to do so- the bank loses nothing. You end up defaulting on the loan? The bank forecloses the loan and gets the house. Pay dutifully throughout the amortization term? You just gave the bank a shitload of money through interest. Even the cost of the house going down is usually covered in an attached margin agreement that is part of the mortgage agreement that will reassess the loan based on the new value.

Meanwhile, part of the BS idea is that when you buy a home your payments are going into the houses "equity", as if it’s some magical, good asset to have. Equity is basically just how much of the amortized principal you’ve paid off. It’s your "interest" in the home. it changes based on the value of your home and can go up and down, but it’s not something truly valuable from an investment perspective. It’s basically just how a collateralized loan works in terms of asset distribution.

A lot of the pro-homeowner talk discusses how useful equity is when you sell the home. But that makes no sense- buying a home and then selling it was basically using a home as a investment, but homes are shitty investments. One would be better off in that case to rent, and put the extra money they now have available due to not having any number of associated costs that a homeowner has into a proper investment or savings account to accrue interest. A person would get a lot more return that way over the same period of time (disregarding some magical insight into real estate becoming a sellers market that causes your home to appreciate in value) than buying a home and getting "equity", and have a lot more as a result that could be put towards a better house that you actually intend to stay in, not use as a shitty bank because they don’t understand what a collateralized loan is and believe bullshit bank commercials where some little girl is searching through her parents house to find the "equity".

Anyway, That’s my sort of non-sequiter rant on the subject…

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