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Showing Original Post only (View all)Is Buying a House Still the Best Way to Build Wealth? [View all]
http://www.theatlantic.com/business/archive/2015/02/is-buying-a-house-still-the-best-way-to-build-wealth/385243/?njd0ah
Ricardo and Denise Cabrera were so burned by the last housing crash that it is hard to believe they're vying to become homeowners again.
In 2005, the couple bought a starter home for $490,000 just outside of Los Angeles through a no-money-down, interest-only loan. By 2009, after the market crash, that same home was worth roughly $150,000 less. The couple decided to do a short sale to get out from underneath their mortgage. The only problem? It prevented them from pulling any equity out of the house; just as bad, it marred their high credit scores. "We walked away with nothing," Denise says.
Now, after five years of renting, the Cabreras are once again putting their faith (and savings) into the housing marketthis time, through a 10 percent-down mortgage on a five-bedroom, Cape Cod-style house in the San Fernando Valley, on the edge of Los Angeles. The seller accepted the couple's bid of $530,000, after receiving roughly 20 other offers, Ricardo says. With the property now in escrow, the Cabreras and their children, ages 9, 5, and 4, hope to move in by the end of February. "For me, the house is something we can pass on to the kids," Ricardo says. "Paying rent is just like throwing your money away."
The ideal of American homeownership may have been tarnished during the recession, as the values of so many homes plummeted and the number of foreclosures across the country soared. But for many Americans, like the Cabreras, the emotional rush of buying a home still represents a significant marker of stability and financial success. Buying often gives families access to safer neighborhoods, better schools, and more services than renting. And, like it or not, homeownership still offers the best way to save money for the majority of Americans by building up equity, especially in this era of dwindling pensions and stagnant wages. "It is a forced saving mechanism, and if you don't have to think about saving, it goes better," says Brett Theodos, a senior research associate at the nonpartisan think tank, the Urban Institute.
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to build wealth for the lender from the thousands of almost pure interest payments.
Sunlei
Feb 2015
#1
mortgages are front loaded for interest. the majority of the first many years are interest payments.
Sunlei
Feb 2015
#13
did that but put no money down at all. Lenders handed out mortgages like candy & I took advantage!
Sunlei
Feb 2015
#54
I'm glad you got a good deal. The neighborhood would have changed either way, so it's good
merrily
Feb 2015
#23
They would have had no equity with that price drop even if they had put 20% down.
Gormy Cuss
Feb 2015
#24
I wouldn't sell a home that is paid for. Rent it for retirement or general income.
Sunlei
Feb 2015
#42
The strategic reason to buy property with interest-only loans is that you don't tie up your cash
Gormy Cuss
Feb 2015
#26
It is still the best way, they are not making any more land. Well they are but not on that large of
ChosenUnWisely
Feb 2015
#31
like everything else the housing market's been "financialized": suburbs aren't built for housing for
MisterP
Feb 2015
#55
If they're at that kind of place in their lives where they can manage to do that without issue, then
MADem
Feb 2015
#68
There really are so many factors that can weigh heavily for, or against, buying a home
Lex
Feb 2015
#51
Probably is at least an effective defense against poverty in old age...If you can pay it off
TheKentuckian
Feb 2015
#90
It all depends on the circumstances. We encouraged our daughter and son-in-law to buy
pnwmom
Feb 2015
#91
How is home owership supposed to make up for "dwindling pensions and stagnant wages"
Matariki
Feb 2015
#92