Are we in over our heads?
OhioGuy
Which talks about living beyond your means, and 5 signs that you are doing
so.
I was wondering, does a house payment count as savings?
We specifically bought a fixer-upper that would eventually be an
investment property, but right now is our first house. (double) We also
took on a 10 year mortgage instead of a 30 year, so that interest would be
low. As such, most of our monthly payment goes to the principle, rather
than interst. (which is a modest 5.2% on our loan - not much more than
inflation)
Anyway, we are paying $370 a month, and have gotten the balance down to
about $11,000 in 5 years, with 5 years remaining. We have paid extra, so
should get it all paid off early. The actual payment due each month is
about $345, so we pay a little extra each month as well as put anything we
have left over towards the loan.
I stay home and take care of our toddlers, plus do some freelance writing
and home repair/renovation when I can. My wife makes the bulk of our
income, bringing in about $40k a year.
So we're paying something like 15% or 20% of what we get after taxes
towards the house. If you include repair costs, the figure is definitely
20%.
However, almost all of this is building up equity in the house, and plus
getting us closer to the point where we can move out and realize rental
income from the property, so I'm not sure if it should be viewed as if we
had spent too much and bought a dream home that we couldn't afford. (we got
this place for about $45,000 - but it needed a new roof and other repairs
right away)
So would our house related spending be considered savings, or even an
investment where this article is concerned?
I've never considered it something that would be a sign that we were
living beyond our means - just the exact opposite, in fact. We were SORELY
tempted to buy something closer to a dream home, which would have forced us
to take on a LOT more debt, and do a 30 year mortgage. I just couldn't
stomach the thought of most of our monthly payment going to interest.
Vic Smith
>
> So would our house related spending be considered savings, or even an
>investment where this article is concerned?
>
You can "consider" it however you want to.
Financially, I've never considered my house anything but a debt and an
expense.
When my remaining mortgage is paid off, the house will be expense
only.
Since I always want a house for my "home" the only time I'd consider
its market value is when I'm thinking about selling it to buy a
different house.
I always considered paying down the mortgage as reducing debt.
As to savings, the only thing I've considered as savings is FDIC
insured savings/CD/IRA-CD accounts - minus my debt.
The one exception to that was 401k money market "savings" which
was not FDIC guaranteed. I did include that when considering my
retirement, and immediately upon retirement rolled it out of the 401k
and into FDIC insured IRA-CD's at 3 times the interest rate.
Yes, I'm conservative that way. Some might call it frugality.
But I never overestimate my actual worth. and always know what I can
afford.
I know a number of people whose "life plans" are rapidly changing
because they considered Wall Street equities "savings."
That's like a guy throwing dice at a casino craps table with a 10
grand stack of chips on the table and thinking he has 10 grand to his
name.
He's got to see what's in his pockets when he leaves the casino.
BTW, I'm not exactly a stick in the mud, as I usually have a commodity
futures trade active - pure gambling. That account sits aside from
all others. If I take money out it goes to savings, and if I put
money in it comes from savings. Otherwise its balance is meaningless.
Like the market value of my house.
--Vic
clams_casino
>On Wed, 16 Jul 2008 09:55:19 -0400, "OhioGuy" <no...@none.net> wrote:
>
>
>
>> So would our house related spending be considered savings, or even an
>>investment where this article is concerned?
>>
>>
>>
>You can "consider" it however you want to.
>Financially, I've never considered my house anything but a debt and an
>expense.
>
>
When I total my housing costs over the past 35 years (mortgage, taxes &
interest after deductions, insurance, maintenance, selling costs, etc),
it's almost equal to my current selling price, excluding inflation. My
best return was between 74-81 when it my first home was appreciating
about double my mortgage / tax payment and when I had relatively little
equity, followed by 01-05 in my current home. Between 81-01, costs were
somewhat higher than appreciation. Like most everyone, I've taken about
a 15% hit in value over the past three years, but still significantly
ahead of its 01 value.
For us, it's been a fairly low cost / expense considering its current
value - essentially the cost of inflation (reduced value of the dollar).
I'm not convinced owning a home can ever be a money making investment
after all expenses / inflation, but then again, it's real purpose is to
keep the rain out.
Rod Speed
> I was just reading this article:
> Which talks about living beyond your means, and 5 signs that you are doing so.
> I was wondering, does a house payment count as savings?
Yes. But it can more complicated than that when house values plunge.
And interest only house payments dont, and normal house payments are
partly capital and partly interest and the interest is lost money, not savings.
Corse the alternative, rent, is no savings at all.
> We specifically bought a fixer-upper that would eventually be an investment property, but right now is our first
> house. (double) We also took on a 10 year mortgage instead of a 30 year, so that interest would be low. As such,
> most of our monthly payment goes to the principle, rather than interst. (which is a modest 5.2% on our loan - not much
> more than inflation)
Then most of your payment is savings.
> Anyway, we are paying $370 a month, and have gotten the balance down to about $11,000 in 5 years, with 5 years
> remaining. We have paid extra, so should get it all paid off early. The actual payment due
> each month is about $345, so we pay a little extra each month as well
> as put anything we have left over towards the loan.
> I stay home and take care of our toddlers, plus do some freelance
> writing and home repair/renovation when I can. My wife makes the bulk of our income, bringing in about $40k a year.
> So we're paying something like 15% or 20% of what we get after taxes
> towards the house. If you include repair costs, the figure is definitely 20%.
> However, almost all of this is building up equity in the house, and plus getting us closer to the point where we can
> move out and realize rental income from the property, so I'm not sure if it should be viewed as if we had spent too
> much and bought a dream home that we couldn't afford.
Nope, its a quite effective saving as long as the value of the place doesnt
drop too much and even if it does, it probably wont drop to below what you
paid for it, even if you include what you have paid for the renovations etc.
> (we got this place for about $45,000 - but it needed a new roof and other repairs right away)
Likely still reasonable value.
> So would our house related spending be considered savings,
Yes.
> or even an investment where this article is concerned?
Yes.
> I've never considered it something that would be a sign that we were living beyond our means - just the exact
> opposite, in fact.
Correct.
> We were SORELY tempted to buy something closer to a dream home, which would have forced us to take on a LOT more debt,
> and do a 30 year mortgage.
And you would have seen that drop in value a lot more too.
> I just couldn't stomach the thought of most of our monthly payment going to interest.
And now you get to take advantage of the substantial drop in house values
and can buy that dream house much more cheaply than you could have if
you had bought that in the first place.
Worth waiting a bit tho to see if the house prices continue to drop even more yet if you do decide to move.
JR Weiss
> I was just reading this article:
>
> I was wondering, does a house payment count as savings?
No. it is debt.
> We specifically bought a fixer-upper that would eventually be an investment
> property, but right now is our first house. (double) We also took on a 10
> year mortgage instead of a 30 year, so that interest would be low. As such,
> most of our monthly payment goes to the principle, rather than interst. (which
> is a modest 5.2% on our loan - not much more than inflation)
Rental property is an investment, not savings. If you have the other half of
the "double" rented out, you made a smart decision in buying the property in the
first place. If you do not yet have it rented out, but are still living within
your means -- reducing any other debt rather than accumulating more -- then you
made a smart move.
> So we're paying something like 15% or 20% of what we get after taxes towards
> the house. If you include repair costs, the figure is definitely 20%.
That is well below the 36% threshold that is widely viewed as a mortgage debt
cap. You're doing well!
> However, almost all of this is building up equity in the house, and plus
> getting us closer to the point where we can move out and realize rental income
> from the property, so I'm not sure if it should be viewed as if we had spent
> too much and bought a dream home that we couldn't afford. (we got this place
> for about $45,000 - but it needed a new roof and other repairs right away)
>
> So would our house related spending be considered savings, or even an
> investment where this article is concerned?
It would be an investment. "Savings" in context generally means liquid
investments. Your house is not liquid, especially while you are living in it.
> I've never considered it something that would be a sign that we were living
> beyond our means - just the exact opposite, in fact. We were SORELY tempted
> to buy something closer to a dream home, which would have forced us to take on
> a LOT more debt, and do a 30 year mortgage. I just couldn't stomach the
> thought of most of our monthly payment going to interest.
That may be the ONLY hard spot in your plan... If you plan to rent out the
house, then putting all your spare cash into the mortgage, instead of building a
down-payment fund for your "dream home" (or at least the next step toward it),
may not be the best approach. To buy your next one with a sane mortgage, you
will need 20% down to avoid private mortgage insurance. While you might be able
to use your present house to provide a home equity loan or line of credit, that
will still be more debt, and would count toward the 36% cap if you used it for a
down payment or to reduce your next mortgage.
Your current priorities should be:
Pay your current debts. After required mortgage/car payments pay any credit
card debt as quickly as possible, highest interest first.
Accumulate an emergency savings fund of 6-9 months take-home pay. Money
Market accounts or staggered short-term, renewable CDs (e.g., 12-month CDs, with
equal amounts invested every 2 months for a total of 6 CDs) are good vehicles
for this purpose.
Start your retirement planning. At the minimum, the max allowable IRA
contribution every year plus the max into any 401k fund that will be matched by
your/your wife's employer (often 10% of salary, matched at 50% by the employer).
Build your down-payment fund. Decide how much you will need, and when.
Figure out how much you need to save monthly to accumulate it.
Pay down your mortgage beyond the minimum payment. In your position, this
is actually the LAST thing you should be paying. Once you move out and rent the
house, your rental income will cover the mortgage, taxes, insurance, and likely
a modest positive cash flow.
Rod Speed
> Vic Smith wrote
>> OhioGuy <no...@none.net> wrote
>>> So would our house related spending be considered savings, or even an investment where this article is concerned?
>> You can "consider" it however you want to.
>> Financially, I've never considered my house anything but a debt and an expense.
> When I total my housing costs over the past 35 years (mortgage, taxes & interest after deductions, insurance,
> maintenance, selling costs,
> etc), it's almost equal to my current selling price, excluding inflation.
I've done a hell of a lot better than that myself over about the
same time, but then I did physically build the house myself.
> My best return was between 74-81 when it my first home was appreciating about double my mortgage / tax payment and
> when I had relatively little equity,
My best return was when actually building it, and we
dont pay tax on the principle residence capital gain.
> followed by 01-05 in my current home.
> Between 81-01, costs were somewhat higher than appreciation. Like most everyone, I've taken about a 15% hit in value
> over the past three years, but still significantly ahead of its 01 value.
> For us, it's been a fairly low cost / expense considering its current
> value - essentially the cost of inflation (reduced value of the dollar).
> I'm not convinced owning a home can ever be a money making investment after all expenses / inflation,
It obviously could have been if you had predicted the market.
> but then again, it's real purpose is to keep the rain out.
Not when the alternative is renting.
Rod Speed
> Why do you have fanny farts after sex?
Rod Speed
blood warmed, that sting my heart. Thou Judas, thrice worse than Judas,
ye blurted:
> I have a life. C:\NIMANIACS\CARTOON\FAKE\STUFF\LIFE.EXE .....See?
Lou
"OhioGuy" <no...@none.net> wrote in message news:g5kuka$f7u$1...@aioe.org...
> I was just reading this article:
>
> http://finance.yahoo.com/banking-budgeting/article/105396/Five-Signs-That-You%27re-Living-Beyond-Your-Means
>
> Which talks about living beyond your means, and 5 signs that you are doing
> so.
>
> I was wondering, does a house payment count as savings?
"Savings" is money you put aside today, presumably so that you can spend it
some time in the future. You can debate this forever - equity in a house is
available for spending, if you take out a home equity loan or sell the
place. But it isn't "savings" under any normal definition of that term.
When you bought the place, you spent money you didn't have. In exchange you
took out a loan and are now paying it back. Aside from the dollar amount
and the period of time, it's no different than taking out a loan to buy a
car, or a vacation, or anything else.
Would you consider counting a car payment as savings?
Rod Speed
> "OhioGuy" <no...@none.net> wrote in message
> news:g5kuka$f7u$1...@aioe.org...
>> I was just reading this article:
>>
>> http://finance.yahoo.com/banking-budgeting/article/105396/Five-Signs-That-You%27re-Living-Beyond-Your-Means
>>
>> Which talks about living beyond your means, and 5 signs that you are
>> doing so.
>>
>> I was wondering, does a house payment count as savings?
>
> "Savings" is money you put aside today, presumably so that you can spend it some time in the future.
Yes.
> You can debate this forever - equity in a house is available for spending, if you take out a home equity loan or sell
> the place. But it isn't "savings" under any normal definition of that term.
Wrong. Its savings in the sense that its part of your assets
and you can choose to downsize after the kids have pissed
off and spend the difference on anything you like, just like
you can with any other form of savings.
> When you bought the place, you spent money you didn't have. In exchange you took out a loan and are now paying it
> back.
And that is a form of forced savings.
> Aside from the dollar amount and the period of time, it's no different than taking out a loan to buy a car, or a
> vacation, or anything else.
Wrong, the asset value of the house remains after the loan has been paid off.
There is no asset value that can be turned into cash with the vacation.
> Would you consider counting a car payment as savings?
Nope, because the value of the car drops significantly over time.
The value of the house usually increases significantly over time and so is a form of savings.
Rod Speed
Christendom, ye grunted:
> Yes, but my whole life is pain.
Gene S. Berkowitz
jrweiss98...@remove.comcast.net says...
> "OhioGuy" <no...@none.net> wrote...
> > I was just reading this article:
> > Which talks about living beyond your means, and 5 signs that you are doing so.
> >
> > I was wondering, does a house payment count as savings?
>
> No. it is debt.
Not necessarily. Making a house payment is paying down debt, which IS a
form of saving. If the house payment was spent on anything else, the
debt would grow, and that, to an economist, is considered "negative
savings".
--Gene
OhioGuy
Hmm, not so much, because cars depreciate a lot, and because they are
always on the move, they tend to eventually die.
I've never made a car payment, because we put money aside regularly into
value stock investments (about 5 stocks) to use for a good used vehicle. (we
currently have a 1969 Ford van, a 1994 Dodge van, and a 1996 Buick Century)
As such, we avoid paying interest to others, and get it ourselves instead.
In the meantime, we get dividends on the stocks as well - usually 6%, plus
anything that the stock itself appreciates. (one of ours went up 48% in the
past 17 months)
So no, a car payment would not be savings, but my alternative to a car
payment probably would be considered savings, because I can liquidate the
stock and have the money in my bank account in roughly 3 days.
JR Weiss
> >Would you consider counting a car payment as savings?
>
> Hmm, not so much, because cars depreciate a lot, and because they are always
> on the move, they tend to eventually die.
Not only that, but cars are not "liquid" investments -- you cannot always turn
them into cash easily without significant penalty/discount.
Lou
"OhioGuy" <no...@none.net> wrote in message news:g5obk3$hn3$1...@aioe.org...
> >Would you consider counting a car payment as savings?
>
> Hmm, not so much, because cars depreciate a lot, and because they are
> always on the move, they tend to eventually die.
Real estate doesn't always go up in value either, and if you hold onto a car
long enough, it goes up in value because it's an antique.
> I've never made a car payment, because we put money aside regularly into
> value stock investments (about 5 stocks) to use for a good used vehicle.
(we
> currently have a 1969 Ford van, a 1994 Dodge van, and a 1996 Buick
Century)
> As such, we avoid paying interest to others, and get it ourselves instead.
> In the meantime, we get dividends on the stocks as well - usually 6%, plus
> anything that the stock itself appreciates. (one of ours went up 48% in
the
> past 17 months)
Stocks don't always go up in value either, and dividends aren't guaranteed.
It's even possible to lose your entire investment if the issuing entity goes
bankrupt.
I have no idea what cars of the vintage you own cost to buy or maintain.
But one thing I'd look at is if the price of cars you're willing to buy is
going up faster than your earnings on the stocks. If that's the case, you
could be paying more in terms of hours worked to earn the money to save up
beforehand than you would by taking out a loan and paying interest.
> So no, a car payment would not be savings, but my alternative to a car
> payment probably would be considered savings, because I can liquidate the
> stock and have the money in my bank account in roughly 3 days.
Stocks are considered investments. Your money is at risk. Savings
generally are not at risk. Or at any rate the risk is much less - if you
put the money under the mattress, the house could burn down and you'd lose
it. And it's value would erode over the years due to inflation. Money put
into an insured bank account is not at risk (up to $100,000 anyway) unless
the entire federal government collapses completely, like the old Soviet
Union did.
One other long range consideration. My parents would have considered you
thoughtful and thrifty, and would have approved of the way you manage your
finances. My mother died owning a quarter of a million bucks - it never did
her any good. I wish they had splurged a little, now and then.
timeOday
> "OhioGuy" <no...@none.net> wrote in message news:g5kuka$f7u$1...@aioe.org...
>> I was just reading this article:
>>
>> http://finance.yahoo.com/banking-budgeting/article/105396/Five-Signs-That-You%27re-Living-Beyond-Your-Means
>>
>> Which talks about living beyond your means, and 5 signs that you are doing
>> so.
>>
>> I was wondering, does a house payment count as savings?
>
> "Savings" is money you put aside today, presumably so that you can spend it
> some time in the future. You can debate this forever - equity in a house is
> available for spending, if you take out a home equity loan or sell the
> place. But it isn't "savings" under any normal definition of that term.
>
> When you bought the place, you spent money you didn't have.
Exchanging $300K for something you could sell for $300K has no impact on
your net worth.
> In exchange you
> took out a loan and are now paying it back. Aside from the dollar amount
> and the period of time, it's no different than taking out a loan to buy a
> car, or a vacation, or anything else.
>
> Would you consider counting a car payment as savings?
Anything in which you have equity amounts to savings. If you buy a car
for cash, you are ahead of the game, you have equity. Granted, it's a
poor form of "savings" since you only get, say, $20K of equity for $26K
that you spend, and it depreciates rapidly. But really, it's each month
that you keep the car that you are "spending" the money. Just like leasing.
Spending the same money on a vacation gives you $0 equity, so it's
different.
Houses don't depreciate like cars (even lately), so that's even more
different. Making a house payment is "savings" to the extent it builds
equity. If you're early in a 30 year loan, hardly any of the payment
goes to the principal so it builds very little equity. Making extra
payments on your house instead of "saving" (putting it in the bank)
might be better or worse. You have to run the numbers, but even then
you won't know for sure since you can't know the future rate of
inflation or investment returns.
Rod Speed
> OhioGuy <no...@none.net> wrote
>>> Would you consider counting a car payment as savings?
>> Hmm, not so much, because cars depreciate a lot, and because
>> they are always on the move, they tend to eventually die.
> Real estate doesn't always go up in value either,
Yes, but it usually does over the long haul unless you choose it badly.
And for that matter even traditional saving in a savings
account doesnt always retain its value either.
> and if you hold onto a car long enough,
> it goes up in value because it's an antique.
Nope, most of the mass market cars never do, they get scrapped instead.
>> I've never made a car payment, because we put money aside
>> regularly into value stock investments (about 5 stocks) to use for a
>> good used vehicle. (we currently have a 1969 Ford van, a 1994 Dodge
>> van, and a 1996 Buick Century) As such, we avoid paying interest to
>> others, and get it ourselves instead. In the meantime, we get dividends
>> on the stocks as well - usually 6%, plus anything that the stock itself
>> appreciates. (one of ours went up 48% in the past 17 months)
> Stocks don't always go up in value either, and dividends aren't guaranteed.
Yes, but thats true of traditional savings too.
> It's even possible to lose your entire investment if the issuing entity goes bankrupt.
And the bank that holds your savings can go bust too.
> I have no idea what cars of the vintage you own cost to buy
> or maintain. But one thing I'd look at is if the price of cars you're
> willing to buy is going up faster than your earnings on the stocks.
Its actually gone down here in recent times.
> If that's the case, you could be paying more in terms of
> hours worked to earn the money to save up beforehand
> than you would by taking out a loan and paying interest.
Yes, but that isnt common in most of the modern first world.
>> So no, a car payment would not be savings, but my alternative to a car
>> payment probably would be considered savings, because I can liquidate
>> the stock and have the money in my bank account in roughly 3 days.
> Stocks are considered investments.
They are also considered savings by anyone with a clue.
> Your money is at risk.
It is even with savings kept under the bed.
> Savings generally are not at risk.
Depends entirely on how they are held.
> Or at any rate the risk is much less
In fact you generally do better over the long haul on value with the
value of the house you live in than you do with traditional savings in
a savings account. In spades with savings held in cash under the bed.
> - if you put the money under the mattress,
> the house could burn down and you'd lose it.
And if put it in a safety deposit box, it may be covered by insurance in some
situations like when you get the amount in there counted and confirmed etc.
> And it's value would erode over the years due to inflation.
> Money put into an insured bank account is not at risk (up
> to $100,000 anyway) unless the entire federal government
> collapses completely, like the old Soviet Union did.
And plenty of other modern first world countrys dont have deposits insurance.
> One other long range consideration. My parents would
> have considered you thoughtful and thrifty, and would
> have approved of the way you manage your finances.
Any anyone with a clue realises that a mortgage is a form of savings.
One which most go to quite a bit of trouble to continue paying even
if their circumstances change in the short term too, so it has some
real advantages savings wise over just keeping it in cash in the bank.
> My mother died owning a quarter of a million bucks - it never did
> her any good. I wish they had splurged a little, now and then.
But it isnt always easy to work out how long you are going
to be around for and so when you can run the cash down etc.
Rod Speed
>>> I was just reading this article:
>>> Which talks about living beyond your means, and 5 signs that you are doing so.
>>> I was wondering, does a house payment count as savings?
>> "Savings" is money you put aside today, presumably so that
>> you can spend it some time in the future. You can debate
>> this forever - equity in a house is available for spending, if
>> you take out a home equity loan or sell the place. But it
>> isn't "savings" under any normal definition of that term.
>> When you bought the place, you spent money you didn't have.
> Exchanging $300K for something you could sell for $300K has no impact on your net worth.
But entering into a morgage does encourage you to save and
many keep paying off the mortgage even if that does require
a tightening of the belt in the short term, say between jobs etc.
clams_casino
>
>
>If you make a profit in the long-run, your house payments are savings.
>It depends on if you take a profit or a loss after the mortgage is paid
>off. Odds are, you'll profit.
>
>
Any "profit" will depend on how accurately you consider / ignore
expenses - taxes, insurance, mortgage interest, maintenance, inflation
(value of your dollar), etc..
It's easy to show a profit by ignoring expenses, as commonly done by
most ebay sellers.
Rod Speed
> Shawn Hirn wrote
It isnt hard to show a profit when including expenses over the long
haul, and many of them are paid by renters anyway, even if indirectly.
> as commonly done by most ebay sellers.
Thats bullshit.
Lou
"timeOday" <timeOda...@theknack.net> wrote in message
news:vtKdnXn8P9-OnR3V...@comcast.com...
> Lou wrote:
> > "OhioGuy" <no...@none.net> wrote in message news:g5kuka$f7u$1...@aioe.org...
> >> I was just reading this article:
> >>
> >>
http://finance.yahoo.com/banking-budgeting/article/105396/Five-Signs-That-You%27re-Living-Beyond-Your-Means
> >>
> >> Which talks about living beyond your means, and 5 signs that you are
doing
> >> so.
> >>
> >> I was wondering, does a house payment count as savings?
> >
> > "Savings" is money you put aside today, presumably so that you can spend
it
> > some time in the future. You can debate this forever - equity in a
house is
> > available for spending, if you take out a home equity loan or sell the
> > place. But it isn't "savings" under any normal definition of that term.
> >
> > When you bought the place, you spent money you didn't have.
>
> Exchanging $300K for something you could sell for $300K has no impact on
> your net worth.
True. And I sense a possible long, unresolvable debate in the offing. In
the usual, everyday meaning of the words, pay off a debt is not the same
thing as "savings", even though either action increases your net worth.
> > In exchange you
> > took out a loan and are now paying it back. Aside from the dollar
amount
> > and the period of time, it's no different than taking out a loan to buy
a
> > car, or a vacation, or anything else.
> >
> > Would you consider counting a car payment as savings?
>
> Anything in which you have equity amounts to savings. If you buy a car
> for cash, you are ahead of the game, you have equity. Granted, it's a
> poor form of "savings" since you only get, say, $20K of equity for $26K
> that you spend, and it depreciates rapidly. But really, it's each month
> that you keep the car that you are "spending" the money. Just like
leasing.
Again true, and again outside the usual, every day meaning of those words.
I would tend to say that you "spent" the money the day you bought the car,
however. The day by day decrease in value is due partly to wear and tear
and partly to obsolescence (technological and, ahh, let's call it
fashionable, in the sense that what's new and spiffy today seems dated and
old fashioned eventually).
If you took a cab every day, I'd say you spent the cab fare every day. If
instead you bought a car for cash, I'd say you spent the money the day you
forked over the cash. The difference is that if you take the cab, you have
all that money you've saved up available to spend on something else.
> Spending the same money on a vacation gives you $0 equity, so it's
> different.
>
> Houses don't depreciate like cars (even lately), so that's even more
> different. Making a house payment is "savings" to the extent it builds
> equity. If you're early in a 30 year loan, hardly any of the payment
> goes to the principal so it builds very little equity. Making extra
> payments on your house instead of "saving" (putting it in the bank)
> might be better or worse. You have to run the numbers, but even then
> you won't know for sure since you can't know the future rate of
> inflation or investment returns.
In dollar terms, most home equity comes from market appreciation, not paying
down the mortgage. In some places at some times, market depreciation can
wipe out whatever equity you might have.
I basically agree that you have to run the numbers to see which alternative
is better, but you have to remember that the results will be dependent on
the assumptions you make as to inflation and interest rates, changes in the
local market, the overall economy, etc. Take whatever numbers you get with
a grain of salt - things like solar eclipses are predictable 30 years out,
but very little in human affairs is.