Mortgage is Debt

Crackpot.

So many things wrong with this.

First of all, debt isn't evil.

Interest only compounds if you pay less than the interest every month. Most mortgages require you to pay all of the interest and pay down the principal every month. The extreme is interest-only mortgages, but even then the interest isn't compounding.

Most people cannot and should not build their own house: "then save up enough money to build a house with your two bare hands and some help"

Present value of future payments is LESS than the nominal value.

This person links constantly to the NY Times tool but doesn't seem to have studied it.

> If you sell your house for less than you paid, it’s a bad investment. Financially-speaking.

If I buy a house today for 500K and sell it in 10 years for 400K, I have spent 10K / year for housing.

If I spend 2K / month in rent for 10 years, I have spent 24K / year in housing.

Obviously there are differences in homeowner's insurance vs. renter's insurance, differences in property taxes & tax deductions, maintenance costs, security deposits, etc. But while there are risks and rewards to both, it seems patently false to claim that a dollar-value loss on a property sale by any means makes the initial purchase a "bad investment. Financially-speaking."

Yeah but if you look at the capital gains it can be smart. In New Zealand it's a huge tax loop hole too. I have a mortgage and 3 boarders. I pay no tax on the rent from the boarders, I pay no tax on the capital gains.

My estimated house value has increased in the first 8 months enough to offset the first years interest payments. While the market is booming this seems the best thing for me to do. I know the market will not continue to increase like this. I also know I'm taking a risk. But the other side of that is in our largest city housing has become affordable with the average sales price being $1,013,632 while 10 years ago it was around the $400,000 mark. I'm not sure anyone's savings/investing could offset that?

I don't understand why this author is so vehemently against this kind of debt?

We all have to pay SOMETHING to live somewhere. If he's trying to make the point you could end up over time with more assets if you rented and invested the difference, that's an incorrect assumption in most places.

What I'm currently paying for a mortgage on a house (counting PITI) is at least the same, if not LESS than renting. I would be living in lesser surroundings in a rental for the equivalent cost. So why would I not buy?

Yes, I'm responsible for repairs and upkeep. But I didn't overbuy and in 10 years I'll own outright.

I believe this is the case for most of the country - that the difference between the cost of rent and the cost for a mortgage is not great enough to make one the clear choice over the other.

  If you never plan to sell it, run the numbers and understand compounding. If you fall onto hard times financially and miss payments, your compounded debt is going to balloon. 

And if you fall on hard times and can't pay your rent, you're in the same place -- homeless.

  And if you end up in a position where you’re paying down a mortgage for the rest of your life, you’re effectively a renter. In which case it might have made more sense to rent to begin with and instead invest what would have been debt payments in a low cost index fund. Which perhaps would have allowed you to buy a home outright with your savings later on.

Probably not, because if you decide to take on a mortgage that you end up paying on forever, I cannot imagine that you'd be able to save enough on the difference between rent and a mortgage to ever catch up to rising property prices to buy outright.

  Or if you never plan to sell and you’re adamant in not being a noble renter, then save up enough money to build a house with your two bare hands and some help. This is a lot cheaper than mortgaging. And it’ll make you a more skilled and interesting person, and you’ll be a real homeowner if that’s what you’re after, not a fake mortgaged one. Rent or build yourself.

Raise your bare hand if you have the skills to build a house with your own bare hands, help or no. I would love to have that kind of skill, but it is at least a circular argument - to get the skill to build requires finding the time to gain that skill, but if you're working to save and/or pay rent then when do you find that time? And what if you just don't have the physical ability to do it?