Quote:
Originally Posted by V
People always seem to come across as super stupid and unbelievable whenever people write dialogue on this board. Everyone on here must have a lot of dumb friends.
In any case, I know people that think it's an investment because they can build equity and buy something cheaper when circumstances change.
I don't see it that way, because I'm living in the house I expect to live in until I die, but I guess others don't mind the idea of downsizing in their retirement years.
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Ugh, I got a little animated and made a fool out of myself. You know how sometimes things sound better in your head? You were right to point it out. It was bleh.
Idea wise, what I was trying to get at was that most individuals don't know how to unlock the gains of their investment in a primary residence. Most of the understanding I hear is that they build equity and in the future can sell at a gain or re-mortgage a home. When I ask about the high interest payments they are making, the response usually is along the lines of "interest rates are low" as if it's <3% on $1000. But we're talking $100k increments which is a lot of interest per year. Somehow, I am thinking because an asset is involved, the debt doesn't register to many individuals. They don't realize that most of their payments aren't going towards their mortgage. Collateral is a weird concept to many people.
Agreed also about a house being an illiquid asset. You could be rich on paper, but cash poor. There's a reason why many of my generation call each other house poor. Unlocking value in a house isn't the easiest thing in the world to do. Many people don't like renting out space in a home they live in. Some people then say refinancing a home can unlock value only to miss the fact that refinancing is just taking out more debt.
Once you pay off a home, yes, you have an asset that is worth (likely) quite a sum of money that is completely yours. However, in general, many people don't realize that they've spent a lot of their time and money to service a debt.