Money. Who else is sick of it? All we hear about lately is money, debt, deficits. Towns, cities, states and the entire country are all being crushed under the weight of inconceivable amounts of debt. The national and now global financial crisis is just a macro version of what has been going on in millions of American households for years. Borrowing instead of making hard choices or obtaining money from non-debt sources has become the American way.
The government decided that every American needed to own a house, so they created incentives for lenders to provide mortgages in unaffordable amounts to almost anyone who applied. You could borrow 100% of the purchase price, refinance up to 110% of the fair market value and get many mortgages without income verification!There was even an evil instrument called a negative amortization loan where the borrower would pay part of the interest on the mortgage and none of the principal for a period of time, and the unpaid portion of the interest would be tacked on to an ever-increasing principal balance. I just spent 4 years foreclosing on houses in Connecticut and I can tell you - these people really could NOT afford these mortgages!! What's worse is that real estate prices are now based on what can be borrowed rather than what the property is really 'worth.' Same with cars. Why is a relatively decent car now over $30,000? Is it really 'worth' that much money? Should people be spending what is close to half or more of their annual salary on their CAR just because they can squeeze themselves into a 5 year loan or into a lease which will bite them in the ass later?
So listen up, America! There is no shame in renting. Being a tenant is a beautiful arrangement! You can pay for what you need and no more, you don't have to pay for the broken water heater, new roof, plumbing debacle, or real property taxes and, if you don't like where you are living any more or you have to move for work or school, you don't have to wait for your place to sell! Do not buy a home unless you can put down at least 20%, you are going to live there for at least 5 years and you can comfortably afford your mortgage, property tax and insurance payments. And saving money to buy a car you can actually afford without burdening yourself with a monthly liability is not something to be ashamed of, either. Do you really need a brand new car when the market is full of used cars at a fraction of the cost?
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Loved this! People always ask for why we aren't buying a house, and so much of what you wrote is the reason why - we don't want to stay here for 5 years, and we want to be able to put at least 20% down when we move to a place we can see ourselves stay. I wish more people would think this way!
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