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No one really understands our struggle
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this post was submitted on 23 Aug 2023
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Have you purchased a house? Because this part is simply not true. You have to have a percentage of the cost up front. The more you have, the smaller the payments. Lots of folks who are renting out places put a lot down so the mortgage payments (and what they charge for rent) are much smaller than a first-time buyer can afford. Then you have the cost of property tax, maintenance, and repairs that the renter isn't liable for.
This is very much the problem with the Canadian real estate bubble. People are paying rental prices now that absolutely could have paid for a house 5 years ago. But now they are paying a dangerously high portion of their income. The problem is that their rental prices that they pay now wouldn't make the payments on the house today.
Not for myself, but yes, I have. And that's kind of my point. You have these arbitrary barriers to entry on home ownership that are designed to keep poor people out, since the can't afford these costs upfront, and can't save for them because they are either paying their landlords mortgage instead, or are paying money directly to the bank/asset manager/ whoever owns their rental. So it's in the banks best interest to not give them a mortgage.
And a mortgage plus maintainable and tax and everything else will be cheaper than renting, because if it wasn't landlords wouldn't be making money, so would raise rent
I think "designed to keep poor people out" is way off. People selling a product want nothing more than for other people to buy their product. The sellers of the house aren't the ones setting the mortgage details - they have nothing to do with it, they just want to sell the house.
But few people can afford to buy a house outright, so they have to borrow money. The bigger the percentage of the purchase price you have to borrow, the more the payments are going to be. That's not to punish poor people, it's because they're putting up their money so you can buy something, in return for them making a profit on their money.
You're still not getting it. Let's say I want to live in a house that costs $600k, but I don't have it. If I were to find a lender who would finance the whole thing (doubtful), the mortgage payments would probably be around $3k a month, and I can't afford that either. But let's say you have $300k to put down, so only have to finance another $300k, and your payments are more like $1500 a month, which I can afford. I pay you the amount that covers your mortgage, you end up paying property tax and other costs, but my rent is going into your property. If I live there for three years, you've gotten $54k in equity, even if the house's value itself didn't go up any, for just the cost of taxes and maintenance. Meanwhile, I got to live in a house that I flat out couldn't afford.
I was not blaming the people selling the house, I was blaming the banks for putting an arbitrary down payment on getting a mortgage to keep poor people out of home ownership, which benefits the banks as they are all heavily involved in property investment so benefit from more people renting either by directly being the landlords or simply from the increased housing demand from landlords wanting to buy as many properties as possible, thus driving up housing prices, which drives up mortgages and makes them more money.
Like you say, the banks male their money from interest on the loan, so the 20k down-payment they require is an arbitrary barrier to entry.
No, I get it, you're just making up a scenario that doesn't really happen. Like sure a landlord could in theory pay half the price of a house just to reduce mortgage costs so they can rent it out at half the market rate AND pay property tax and maintenance out of pocket, out of thr kindness of their golden hearts. They could also just buy the house outright and let you live in it for free and just make their profit off of the increase in house value. But obviously they won't. The landlord is going to charge you market rate for that 600k house which will almost certainly be more than 3k, because why wouldnt they? And even if they did, are the going to rent directly to you? Or are they going to advertise it and get a slew of offers of people wanting to live in a house for half price and so someone a little bit richer than you will offer them, say 1,750 for the house, because of supply and demand. And the vast majority of people aren't trying to live in houses they can't afford, they are just trying to live.
And even then, it's still not ethical, you're still exploring people for profit for their basic needs without adding any value to the system.