- Joined
- Feb 27, 2004
- Messages
- 2,641
- Reaction score
- 757
Right, but if you're looking at putting $40,000+ into a car while paying rent vs actually purchasing a home and developing equity, the home wins.
Definitely, I agree with that.
My point though is how much did your friend pay in interest in those 4 years? We've lived in our house for 2.5 and have paid 3x as much in interest as in principle and we make extra payments. That cuts into your 35K "profit" in a hurry. Not to mention the several grand you pay at closing when you're buying and then when you're selling. That's all I'm saying. You can't just look at "bought for X, sold for Y" you have to factor in everything else you paid. Even at a low interest rate, you pay tons of interest at the beginning of your loan, not to mention the monthly PMI, hazard insurance, and property taxes. We are at 5.5% (refinancing now though) and still pay a metric *hit-tonne in interest every month. When our parents bought their houses, interest at <10% was unheard of; they owned about 1 shingle in equity after a year.Case in point, my buddy bought his house four years ago now at $165k. Prior to the market collapsing, the house was appraised at $300+ (a greatly inflated value of course) and it's located in a prime spot in the city. Last year it was reappraised at a shade over $200k.
He essentially picked up $35k in equity already just because he bought it at a great time. He was smart and bought a house that requires only minor cosmetic work (new carpeting and such) and the only planned on being there for 10 years max.
If you are buying a house outright in cash, disregard what I'm saying. Everyone else, listen up.