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Featured Mortgage, to be or not to be?

Discussion in 'Christian Advice' started by Willing-heart, Apr 1, 2018.

  1. Yes

    14 vote(s)
    73.7%
  2. No

    5 vote(s)
    26.3%
  1. Phil 1:21

    Phil 1:21 Well-Known Member

    +4,329
    Christian
    Married
    I don’t know how mortgages and foreclosure work in Ireland, but that’s not how they work here. When a house is foreclosed and seized by the bank, it is then sold. The proceeds from the sale repay the mortgage and any fees associated with the foreclosure. The remainder is returned to the defaulted borrower.


    Unfortunately, most forclosures are upside down (more debt than equity). In that case that bank has to sell for less than what is owed and then go after the defaulted borrower for the remainder. And then the borrower files bankruptcy and the bank loses money.


    Good luck? From the standpoint of not suffering major illness or prolonged loss of income? Yes. But one does not become mortgage free at 39 by mere luck (sans a lottery win or something like that). It’s the result of smart financial decisions and proper discipline.


    If you don’t pay your rent you lose your house too.
     
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  2. Jonathan Leo

    Jonathan Leo Well-Known Member

    708
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    That’s what I said and it wasn’t even my money lol
     
  3. MoneyGuy

    MoneyGuy Newbie

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    I do0n't think your friend is being honest. Mortgages don't work that way anywhere as far as I know. Certainly not in North America. I think you've been misled.
     
  4. Jonathan Leo

    Jonathan Leo Well-Known Member

    708
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    I live in Ireland and I know what way mortgage works here.
    It is stated on adverts and in the small print.
    IF YOU DO NOT KEEP UP YOUR PAYMENTS YOU MAY BE IN DANGER OF LOSING YOUR HOUSE
     
  5. MoneyGuy

    MoneyGuy Newbie

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    I'm not questioning that, just the part about losing your equity. I'd need to have that part verified.
     
  6. Jonathan Leo

    Jonathan Leo Well-Known Member

    708
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    Go ahead find out yourself
    God bless
     
  7. MoneyGuy

    MoneyGuy Newbie

    905
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    I don't have to. I'm right, sorry.
     
  8. gideon123

    gideon123 Humble Servant of God

    +536
    United States
    Christian
    Married
    Let me offer some Biblical and practical wisdom ...

    First, before you buy any house, always crunch the numbers. This is something that many home buyers never do. Example, a $500,000 house bought with a downpayment of $100,000. You owe $400,000, which you are willing to.pay off over 30 years, with 6.5% interest rate. The math says this: you will pay a total of $910,178 for this house - although the real value is only $500,000. Total interest paid is $510,178 ... more than the value of the home !!!!

    1. Now you know why Banks have very big buildings ... imagine the money they make.

    2. God does not want people to be slaves to debt, yet tragically many people are.

    3. Be wise, and buy a small simple house for a low price!!!!

    Blessings!!
     
  9. RaymondG

    RaymondG Well-Known Member

    +2,789
    United States
    Christian
    Married
    So the small houses are for God's people, and the big houses for the children of Satan?
     
  10. AlexDTX

    AlexDTX Well-Known Member Supporter

    +2,452
    United States
    Christian
    Married
    US-Others
    Now you are comparing apples to oranges. Rent is loss through and through, no argument here. The OP question regards debt. The answer is to wisely manage debt but still get out of debt as soon as you can.

    Rom_13:8 Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law.​

    This is what my response was about. Using debt temporarily but have a plan to get out of it as fast as possible. I stand by my math. The amount of deduction received for mortgage and taxes added up over a 30 year period why paying interest is still far less than the amount of interest you pay if you simply follow the 30 year note route.
     
  11. Jonathan Leo

    Jonathan Leo Well-Known Member

    708
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    In where your living yes, not where I’m from
     
  12. miamited

    miamited Ted Supporter

    +3,473
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    Christian
    Married
    Hi alex,

    Yes, I understand the OP's question, but when looking for answers to any question we have to be aware of the available options. For example, if I want to take a trip from my home in SC to sunny Miami Fl the available options would be to take I-26 to I-95 straight down to Miami. Or, I could take U.S. 1 through GA and then pick up I-95 in Jacksonville and drive on down to Miami. An available option would not be to drive to Kalamazoo MI and then down through Illinois if my purpose is just to go from my home to Miami.

    Similarly, in this discussion, one must be aware of the available options for housing. That is to either rent out a home or apartment or buy a home or condominium. A family of four living in the back of a station wagon really isn't a valid available option. Now, of those two options, which one is the wiser option? In either case you're going to pay someone to let you keep the key to your home. You're either going to pay a landlord forever or you're going to pay a mortgage bank for the duration of a mortgage. Historically, those who go the route of paying interest for the period of a mortgage, come out better than those who pay a landlord forever. In most cases, if you're going to be in a home for awhile, those who opt the mortgage route pay less over 5-10-15 years and will eventually get to the point, such as I am, where all you pay to stay in your home are county taxes, hazard insurance, and repairs.

    Some people seem to think that because they are renting that they don't have to pay taxes and insurance and repairs because all they pay is one payment to a landlord. That just isn't true and in most tax districts homeowners get better tax treatment than those living in a business property that is some landlord's rental. But besides that little issue, out of that rent that they pay the landlord, he still pays all the taxes and insurance and repairs for the home that a homeowner has to pay. Ultimately, it is still the person living in the home that pays all taxes, insurance and repair bills for their home.

    In most cases, even if a home buyer can't come up with a 20% down payment, they will still, 10 years down the road, be better off financially to have bought their home than to rent. Now, that's in most cases. Yes, there are situations where that doesn't hold true and for those people they need to be aware that renting may, 10 years down the road, have been the best option for them. If you aren't responsible with your credit you'll pay more for your mortgage costs. Those people may be better off renting.

    I bought a home from a couple in Miami 30 years ago that had bad credit. They were paying something like 11-13% on their mortgage and their payment on a little $80,000 home was like $1,300/month. I bought that $80,000 home from them and was able to secure financing at 6%, which was good at the time, and the day I took over the home, even though I owed as much money on it as they had initially borrowed, my payment was less than $800/month including escrow. That family would probably have been better off to rent. They were two months behind on their mortgage when I made them an offer and their interest costs were literally eating their finances alive. Then, because their mortgage costs were so high, the rest of their credit bills didn't get paid either.

    But, let's face it, they were just completely unwise with their credit which cost them a fortune just because of their bad credit. They had bought the home back when rates had sky rocketed, but because their credit was so bad no lender would refinance them. That just isn't wise.

    It has always been my experience, that when matching like for like in housing, you'll pay less with a mortgage and escrow than you will for a rental. In other words, a 1,000sf 2 bedroom apartment will rent for about $850. in my area. But I can buy a 1000sf 2 bedroom condo for about $70,000. A 30 year mortgage at today's 4% would cost you about $334. Add in $300 hundred a month escrow for taxes and insurance and HOA fees and you can live in pretty much exactly the same home for about $650/month if you buy a similar unit.

    If you want to rent a nice 3 bedroom home with a yard you'll pay about $1,400 in my area. You can buy nice 3 bedroom homes with yards for $180,000. With no down payment that comes to only $860/month for the mortgage and again add in another $300 a month for taxes and insurance. You likely won't have any HOA fees in a lot of areas where I live. You can buy pretty much the same house that you'd rent for $1150. Now there will be the cost of upcoming repairs, but if you're smart you'll get a home that has a fairly new roof so it'll be at least 20 years before you have that bill to face. In 20 years you won't be paying $1,400/ month for that rental home, but your mortgage costs, if you get a fixed rate mortgage which a strongly advise, will stay constant. So likely, just the cost of the rent increases over 20 years would have cost you as much as your new roof in 20 years.

    During the recent downturn in the housing market, home sales prices fell like a rock. Guess what happened to rents? In Miami, where my rental is, they increased because there was so much demand from people who were put out of their 'owned' homes. So, even in the bad times, for those who took care of their credit and were able to buy, that was the best time to buy. Investors were picking up rentals for a song. However, that was a short blip in the housing market and those deals are gone now.

    I do completely agree with you that once you have taken the leap into home ownership, then you should work to pay off your mortgage quicker than your 30 year amortization schedule. Most people do. They either sell their home in 5-7 years and pay off the mortgage or they make accelerated payments towards the principle.

    God bless,
    In Christ, ted
     
  13. Philip_B

    Philip_B all shall be well and all shall be well and ... Supporter

    +4,376
    Australia
    Anglican
    Married
    I think this is an area where the simple changes in relative values over time have dictate a new approach. In the 1830's a curate's stipend for one year was roughly equivalent to the price of a modest flat in Knightsbridge. Today that stipend would be unlikely to pay the interest and you would need something more like 120 years of stipend to buy the flat.

    The pragmatic fiscal reality is that rent is not always the best long term solution, and that in order to provide for the family in the long term one needs both accommodation and superannuation (retirement income stream). How much one needs of either is a great matter of debate. Given the median price of a house in Sydney is 12 times average annual earnings before tax, for all but the privileged few paying cash for your first house is simply not realistic. The alternatives are some sort of co-operative housing, or a mortgage. If you elect for a mortgage you need to be confident in your income, the price you are paying for the house, and the prospect of long term capital growth.

    I encouraged one of my sons to invest 30K as a deposit on a unit, which he has been paying off faster than required by the bank, and now ten years down the track he has about 280K equity in the property. That happens when the value of the property increases faster than the interest rate, which has been the case for most of the time since the Great Depression.
     
  14. mukk_in

    mukk_in Yankees Fan Supporter

    +3,324
    India
    Christian
    Celibate
    Great question. Personally, I don't like being in debt ("Let no debt remain outstanding except the continuing debt of love"). Mortgage could be different because there's an asset to back it up. Most families rely heavily on home equity. I plan on buying a home with cash and where I can afford it, and be be free from all forms of debt. Peace in Christ :).
     
  15. AlexDTX

    AlexDTX Well-Known Member Supporter

    +2,452
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    There is no disagreement about using options.
     
  16. gideon123

    gideon123 Humble Servant of God

    +536
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    OP ...

    in your original post you said 2 things. first, Christians are really missing the right priorities when we become 'slaves to debt'. And also, in these tough times we can hardly afford to carry high debt loads. Both ideas, absolutely true.

    Here is an example of someone who 'got it right'. The best example i can think of, from all the Christians i know. When this man was young, he took a job in Alaska. 3 years on the Alaska pipeline. Very good money. But very hard living conditions. He worked day and night. He saved everything.

    Then he returned to a quiet rural area in the mainland. He bought a piece of land, and his own lumber. Thats it. Then he built his own house. And when he was finished, he owned his house ... free and clear. No debts.

    His house was simple for a long time. It had none of the fancy conveniences that houses in the city have. But it was liveable. And gradually over the years, he improved it and re-built the rooms.

    A true success story!!
    Thats how to do things .. No Debt.

    Blessings!!
     
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  17. nanookadenord

    nanookadenord Well-Known Member

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    That's well and good for that person. It doesn't mean it will work for others.

    I'm 43 years old. Have bad knees and a really bad ankle as the doctor said I dislocated it so bad that I nearly fractured it. I have to wear an ankle brace the rest of my life and be careful of what I am doing or I will easily reinjure it.

    There is no going to Alaska for me to work on pipelines. I don't know how to build a house, not even going to try. I cannot save up over 150k or more for a home.

    For some, like me, if we want a house, a mortgage is going to have to be the way we get it. I will need a large home as when my girlfriend and I marry there will be three kids in the house and each one as they will be older will require their own room. So, we'll need four bedrooms.

    So, for some, what you said may work,but it is not reality for many.

    I second what some have said, get a mortgage and do your best to pay it off before the max amount of years on it.
     
  18. GandalfTheWise

    GandalfTheWise In search of lost causes and hopeless battles

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    There is much good advice on this thread though some that I would disagree with. The only thing I would add is that you need to educate yourself and take control of your decisions. Depending on your situation (including income, job stability, family situation, location, how long you plan on being there), taking out a mortgage might be wise or unwise. Also, make sure that you have a good 4 to 6 month cushion and contingency plans if you lose your job, become disabled, or some family situation forces a change of some sort.

    The four most important things I can tell you are these.
    1. A house is first and foremost a place to live. It will likely cost you money, but perhaps much less money than renting in the long run if you do it correctly. It might possibly make you money if you educate yourself and things work out well.
    2. You make money on real estate when you buy it. If you overpay for a property with serious flaws, you will lose money. If you underpay for a solid property, you have the potential of breaking even or coming out ahead.
    3. Do not assume anything. Do not assume prices will rise. When the economy goes bad, that's when you are most likely to lose a job and watch home prices stagnate or drop at the very time you need to sell.
    4. Carefully read every piece of paper you sign. If you do not understand it, do NOT sign it (even if a realtor or someone else is sitting there staring at you and waiting for you and telling you it is "standard" or just fine). Unless someone is a lawyer that you hired, do not just take their word for it. A few hundreds bucks to pay a lawyer to look at something might well be worth it if you are not sure of something! (We're in the process of selling our house. Our realtor wrote something incorrectly on the paperwork for our first counteroffer that would have cost us about $15K we did not want to spend. Fortunately, I read it, wasn't sure about it, dug in my heels, made everyone mad that we missed the deadline to respond, but kept us from getting into a mess.)

    If you are wise about the house you buy, what improvements you make, and what you do with it, it can possibly yield you money when you sell it or rent it out. If you educate yourself and take control of home ownership (in the same way a wise small business owner takes control of their finances and operations), it can be a blessing. If you just look around a little bit, take what appeals to you, sign the paperwork, and just get into it, you might take on a lot of bondage that you will regret. Educate yourself on home wiring, plumbing, roofing, foundation, construction, and other things. Not enough to do these things yourself, but to know what you need to look for to see what you are getting. If you cannot look at a house and be able to estimate the age, look at the lay of the land (where will water collect), notice siding, notice the quality of the foundation and construction, you need to educate yourself on these things. You are talking decades of your life to pay this off if things go wrong. Spend several hours educating yourself about financing, home construction, real estate trends, and everything else you can.

    We've been in the same house for a bit over 20 years and had it paid off in about 14 years. It is a solid old house (circa 1915) with a rock solid poured concrete foundation and very solid timbers and supports. Bathrooms and kitchen are dated, some wiring is old (but the electricians think its fine for now) though all outlets are new, and the layout is not as convenient as in new ones. It's also got all the original hardwood floors, trim, and builtins intact and unpainted. As my son-in-law who has been in construction says, it's a house with solid bones that will last a long time with the right care. We're moving to a new town so have it on the market. Most people would be impressed with the numbers. We bought it for about $80K and will probably clear about $200K when we sell it. Now, when you count probably about $80K to $100K of interest on the mortgage, probably about $40K to $50k of improvements over the years, about $60K to $70K of property taxes, our great numbers no longer look so good. Overall, we're probably coming out about $80K or more behind, or it cost us about $4K to $5K/year to own or on the order of $350 to $400/month. In contrast, to rent an equivalent house would have been costing us on the order of $1000/month in our area. We probably saved ourselves on the order of $125K to $150K by owning instead of renting. So, over 20 years, we are far ahead having owned than rented. We'll hopefully have about $200K in hand to buy our next house.

    We are debating buying a nice home in the $120K to $150K range that needs little upkeep or something much cheaper to fix up and then sell in a few years. We don't know what our plans will be going forward. This might be our retirement home, or just a roof over our head for a few years. We're also considering buying land and building a home. The main thing is that we are carefully doing our research. The process of selling our house has also educated me to the things that I want to look for. I'm no home inspector or construction person, but I have a pretty good idea of what to look for in terms of the quality of the foundation, beams, construction, wiring, plumbing, and stuff like that. I pretty much ignore how flashy the appliances are or how new the tub and toilets are. I'm focused on the "bones" of the house, the location, and the land. If it's got good bones, it'll just take upkeep and updating and will retain value. If it's cheaply built or had serious flaws, I don't want anything to do with it.
     
  19. discipler7

    discipler7 Well-Known Member

    +317
    Heard Island And Mcdonald Islands
    Christian
    Single
    .
    Getting a wife/husband or buying a house is a major life decision which should be consulted with the Bible/Word of God, pastor, elders or fellow Christians.

    People should time their house-buying during an Economic Recession or Stock Market Crash which happens about every 12 years like clock-work, ie buy-low. The last recession was in 2008. So, another one is coming soon. In the meantime, they should save money.
     
  20. Willing-heart

    Willing-heart In Christ Alone. Supporter

    428
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    Thank you all for your input into this discussion. I really appreciate you all taking the time to reply. Below are some of the key points I have taken away from your replies.


    IN SUPPORT:

    @Andrew77 - Slave to the lender is a real thing. The shorter the mortgage the better. The bigger the house, the more burden. Buy a home that will cost you less than 25% of your take home pay (on a monthly basis). Pay no less than 20% down. (If the house cost $100,000, you need to pay $20,000 down). Get the smallest mortgage you can, and pay it off as quickly as you can.

    @miamited - You're either going to be a slave to your landlord or a slave to a mortgage bank. The real issue here is that we all have to live somewhere and we want to be wise about how we fund that roof over our heads.

    @Haipule - Trust in Him in all your ways and you can't screw this up--you don't have the authority to!

    @Mountainmike - It is attachment to earthly things, buying a house bigger than you need, because you love the house, or pride in the car you drive to be seen in it, that becomes problematic. Or Indeed doing it in order to become wealthy. Motive matters

    @FutureAndAHope - Pro 31:16 “She considereth a field, and buyeth it; With the fruit of her hands she planteth a vineyard.” The bible praises the godly woman for one of her virtues, buying an investment. Not all Christian's can afford an investment, however, if you don't have a mortgage you are eventually paying dead money into a rental for which you have no return

    @AlexDTX - Borrowing money is not forbidden, but remaining in debt is. God wants us to live debt free and He will make a way if you look for it.

    @GUANO - A mortgage can be less expensive than rent in many cases.

    @RaymondG - For those who can, mortgage is usually better than renting. And if you don’t like the benefits of owning, you can always give the house away for free and move to an apt, and it will be just like you were renting all along...... There are only two options if you choose to live under a roof: Pay your own mortgage and/or property tax, or Pay someone else's mortgage and/or property taxes (and fill up their bank account in the process). Either choice is fine.....I just happen to think that the former is wiser. This is not a religious or spiritual issue. It is a personal choice....and no one should be made to feel like they are doing some for or against God based solely on their decision to rent or buy via loan or cash.

    @RaymondG - Choices have coincidences, and as a Christian we are not only suppose to seek godly wisdom for only the big decisions but in everything we do. What it means to be a Christian is that we are to be utterly dependent upon God in every way. Godly wisdom would help us see things from His perspective and we should seek His wisdom in everything, every decision and at every moment. God bless


    @*LILAC – In my experience, better to pay a mortgage than expensive rent.

    @Willie T - A mortgage is NOT an asset. A home is an asset... one that is going to cost you to maintain its value. The mortgage is an albatross around your neck. It will cost you at least 3 times the value of the house by the time you get it paid off


    @lismore - A mortgage can seem good especially when compared to the otherwise lifelong necessity of rent. As the bible says 'The Boundary lines have fallen for me in pleasant places, surely I have a delightful inheritance'. Once you own your own place there is no more rent and no-one can evict you from your own home. With renting you're never free.

    @Phil 1:21 - If you don’t pay your rent you lose your house too.

    @gideon123 - First, before you buy any house, always crunch the numbers. This is something that many home buyers never do. Example, a $500,000 house bought with a downpayment of $100,000. You owe $400,000, which you are willing to.pay off over 30 years, with 6.5% interest rate. The math says this: you will pay a total of $910,178 for this house - although the real value is only $500,000. Total interest paid is $510,178 ... more than the value of the home !!!!
    1. 1. Now you know why Banks have very big buildings ... imagine the money they make.
    2. 2. God does not want people to be slaves to debt, yet tragically many people are.
    3. 3. Be wise, and buy a small simple house for a low price!!!!
    @Philip_B - The pragmatic fiscal reality is that rent is not always the best long term solution, and that in order to provide for the family in the long term one needs both accommodation and superannuation (retirement income stream). How much one needs of either is a great matter of debate.

    @mukk_in - Mortgage could be different because there's an asset to back it up. Most families rely heavily on home equity. I plan on buying a home with cash and where I can afford it, and be be free from all forms of debt.


    @discipler7 - Getting a wife/husband or buying a house is a major life decision which should be consulted with the Bible/Word of God, pastor, elders or fellow Christians.


    OPPOSED/SOMEWHAT OPPOSED:

    @Jonathan Leo - A mortgage is nothing more than a snare. A mortgage should not carry the penalty of losing your home. It’s the only reason why I condone a mortgage

    @Ancient of Days - The way I see it is if you have a mortgage and are buying your house, your money is going into getting something for yourself. if you rent instead you are giving someone else more money than it would cost for a mortgage and helping them to get richer. So you advocate the banks get richer huh?

    In conclusion, I think it is very possible that along the way money would have wings and fly, friends are going to get tired of you and leave you, families would let you down, jobs would be lost but ALL of the Lord remains forever. When we give up the illusion of safety for the promise of security, we can be assured in Christ alone that we have:
    • Possession that is unfading;
    • Promise that is unfailing;
    • Power that cannot be defeated;
    • Provider who is limitless.
    Whatever my lot, thou art taught me to say - "It is well."

    I would most certainly speak to my church elders before making such a decision and continue seeking God's guidance. I am actually very open to the idea of a mortgage to purchase a house. However I think, it would only make sense to do so if I was eventually to be married. I think it would be something I will discuss with potential future partner too and both of us would have to come to an agreement. Thank you all again and God bless.
     
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