The mortgage or rent question

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jamey
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11:06p, 5/21/26
AG
Just ran across this on X that made me think of the not so popular mortgage debate on the stock market thread recently


This spells out my point pretty well, plus its another asset class in the debasement trade. The decrease in monthly expenses when the mortgage is paid off also just happens to be a little more than me and my wife will need for Medicare and other retirement costs.






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AggieInHouston
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8:19a, 5/22/26
AG
Good thoughts. There are a few extra pros and cons that I think are glossed over though.

One of the biggest benefits, that isn't mentioned, is that lowering your fixed costs heading into retirement lets you pull less from your portfolio, which can matter a lot in a rough market early on. You're not required to sell into a downturn, making your retirement plan more durable. Sequence of returns can be a killer and smaller withdrawals help.

Something else that isn't highlighted is that a good chunk of that $2,200 isn't really an expense. The principal portion is just you paying yourself, into home equity instead of a brokerage account. So the cost you're actually eliminating is the interest, not the whole payment.

From there it really comes down to the rate. A 3% note and a 7% note are completely different decisions. At 3% you can earn more than that today in T-bills or a government money market fund with very little risk; at 7% the guaranteed return from paying it off is hard to argue with. And if you shift the frame to rent vs own rather than payoff vs invest, property taxes carry a lot of the weight, especially here in Texas.

I'd also argue that holding a mortgage lends support to the debasement trade as it's a great inflation hedge since you pay with cheaper dollars over time.
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YouBet
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8:48a, 5/22/26
AG
The other benefit that gets looked over is that you can use your house as a financial asset/collateral, if you needed to.

Can't do that with renting.

Hell of a lot more work to own a house, but that's just part of it.
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OldArmyCT
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9:03a, 5/22/26
AG
In Texas in a $700,000 home your property tax is around $1,000 a month.
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YouBet
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In reply to OldArmyCT • 9:19a, 5/22/26
AG
OldArmyCT said:
In Texas in a $700,000 home your property tax is around $1,000 a month.


Which is why moving out of Texas is almost a financial no brainer once you are retired. If you are just factoring the bottom line.. There are other reasons to stay there that many will value higher than the bottom line.

Our property taxes + insurance + state income tax on a 7 figure home are cheaper than renting in Texas now that we moved out of state. Was not the case in Texas with just property taxes + insurance for us.
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CheeseSndwch
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9:47a, 5/22/26
Bought my first home in Q4 of 2024 at 6.99% and I'm currently 68 payments ahead of schedule, and I hope to be 120 payments ahead by the end of the year.

I probably waited longer than I should have to buy a house but I'm happy with my decision.
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jamey
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10:03a, 5/22/26
AG
If you rent a property similar to what you own, it also includes taxes, interest and everything else you get as a home owner, plus a little profit. Nobody is renting their property for charity

Yiu can rent a lesser property for less but an equivalent property is going to cost more than a mortgage

Taxes and insurance..etc arent add ons to ownership. Theyre just bundled into rent
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Ducks4brkfast
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In reply to AggieInHouston • 11:27a, 5/22/26
AG
Quote:
One of the biggest benefits, that isn't mentioned, is that lowering your fixed costs heading into retirement lets you pull less from your portfolio, which can matter a lot in a rough market early on. You're not required to sell into a downturn, making your retirement plan more durable. Sequence of returns can be a killer and smaller withdrawals help.


Kinda seems like that's the entire point of the tweet.
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Hoyt Ag
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In reply to YouBet • 11:32a, 5/22/26
AG
YouBet said:
OldArmyCT said:
In Texas in a $700,000 home your property tax is around $1,000 a month.


Which is why moving out of Texas is almost a financial no brainer once you are retired. If you are just factoring the bottom line.. There are other reasons to stay there that many will value higher than the bottom line.

Our property taxes + insurance + state income tax on a 7 figure home are cheaper than renting in Texas now that we moved out of state. Was not the case in Texas with just property taxes + insurance for us.

Same here. My house in CO is around 550-600 and I pay around $1500 a year in property taxes. It was one of the biggest shockers to me when I left South Texas. However, we do have the state income tax here, so there is that.
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GeorgiAg
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1:25p, 5/22/26
AG
Don't sleep and just eat what you can scrounge at work or dumpster diving. Just work 24/7. Amazing cost savings.
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AggieInHouston
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In reply to Ducks4brkfast • 1:27p, 5/22/26
AG
Ducks4brkfast said:
Quote:
One of the biggest benefits, that isn't mentioned, is that lowering your fixed costs heading into retirement lets you pull less from your portfolio, which can matter a lot in a rough market early on. You're not required to sell into a downturn, making your retirement plan more durable. Sequence of returns can be a killer and smaller withdrawals help.


Kinda seems like that's the entire point of the tweet.

I must have read the wrong tweet. Didn't see anything about sequence of returns and down markets early in retirement. Just equating the expense saved to a lump sum nest egg.
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EliteZags
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3:47p, 5/22/26
AG
what also could help pseudo mitigate SORR is a portfolio balance several x the value of said home from decades of compounding instead
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TxAG#2011
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5:17p, 5/22/26
The question automatically assumes the terminal sale of the house will be higher.

Will it? Most people just don't factor in closing costs on both ends, selling expenses at 7%, consistent housing OPEX, taxes, and capital expenses.

Too many variables to give a definitive answer, but there is no question that in the last 2-3 years renting / investing was the superior route.
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jsc8116
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5:40p, 5/22/26
AG
I might be in the minority but I have owned 2 homes in the past 20 years. I can't wait until we downsize and just rent somewhere that I don't have to worry about upkeep/maintenance, taxes, etc. Just stressful. Yes, I did rent for several years before me and wife had kids so I know the cons of that as well. I am willing to sacrifice the built up equity for the convenience of being able to have less home ownership crap to worry about in my golden years.
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jamey
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In reply to Hoyt Ag • 10:28p, 5/22/26
AG
Hoyt Ag said:
YouBet said:
OldArmyCT said:
In Texas in a $700,000 home your property tax is around $1,000 a month.


Which is why moving out of Texas is almost a financial no brainer once you are retired. If you are just factoring the bottom line.. There are other reasons to stay there that many will value higher than the bottom line.

Our property taxes + insurance + state income tax on a 7 figure home are cheaper than renting in Texas now that we moved out of state. Was not the case in Texas with just property taxes + insurance for us.

Same here. My house in CO is around 550-600 and I pay around $1500 a year in property taxes. It was one of the biggest shockers to me when I left South Texas. However, we do have the state income tax here, so there is that.


Maybe move to a state with sales tax instead of property tax, become a vegetarian except for Xmas and Thanksgiving dinner and grow your own food.


In the end, none of this stuff is unavoidable. Taxes, insurance, maintenance..etc is a cost in one form or a other everywhere whether you rent or own
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jamey
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In reply to jsc8116 • 10:31p, 5/22/26
AG
jsc8116 said:
I might be in the minority but I have owned 2 homes in the past 20 years. I can't wait until we downsize and just rent somewhere that I don't have to worry about upkeep/maintenance, taxes, etc. Just stressful. Yes, I did rent for several years before me and wife had kids so I know the cons of that as well. I am willing to sacrifice the built up equity for the convenience of being able to have less home ownership crap to worry about in my golden years.


Ive considered that option too. Its not unimaginable that I can sell my current 600K house for a million in 10 years. Sell, and use that money to fund a rental. Hell, move somewhere different every year. Maybe buy an RV and travel the US for a few years first

A more likely outcome is we buy a house in a less expensive area thats half the size, and use the remainder to travel. I can buy a new house 20 minutes north of where I live in DFW for half the price right now
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Heineken-Ashi
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In reply to jamey • 7:30a, 5/23/26
jamey said:
If you rent a property similar to what you own, it also includes taxes, interest and everything else you get as a home owner, plus a little profit. Nobody is renting their property for charity

Yiu can rent a lesser property for less but an equivalent property is going to cost more than a mortgage

Taxes and insurance..etc arent add ons to ownership. Theyre just bundled into rent

In theory, yes.

But the market will pay what the going rate is. Plenty of landlords are struggling right now as rising taxes and insurance CAN'T be priced in.
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jamey
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In reply to Heineken-Ashi • 1:47p, 5/23/26
AG
Heineken-Ashi said:
jamey said:
If you rent a property similar to what you own, it also includes taxes, interest and everything else you get as a home owner, plus a little profit. Nobody is renting their property for charity

Yiu can rent a lesser property for less but an equivalent property is going to cost more than a mortgage

Taxes and insurance..etc arent add ons to ownership. Theyre just bundled into rent

In theory, yes.

But the market will pay what the going rate is. Plenty of landlords are struggling right now as rising taxes and insurance CAN'T be priced in.


Over the course of a lifetime(call it 50 years on average) of renting vs owning similar properties, the owner is going to pay less per month on average, plus keep the equity
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MAS444
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5:17p, 5/23/26
AG
I just can't imagine being a growed up man with a family - kids, grandkids, whatever….and renting a damn house.
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jamey
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In reply to MAS444 • 6:23p, 5/23/26
AG
MAS444 said:
I just can't imagine being a growed up man with a family - kids, grandkids, whatever….and renting a damn house.


About half my neighborhood does it.

One neighbor with 2 kids in elementary school age just resigned for 2 more years. They agreed to paint the house if rent did not go up


Based on talks with another neighbor that was renting i think theyre renting for $3,500 to $3,800 per month.

My mortgage for the same house is $2,900
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YouBet
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In reply to jamey • 6:34p, 5/23/26
AG
jamey said:
MAS444 said:
I just can't imagine being a growed up man with a family - kids, grandkids, whatever….and renting a damn house.


About half my neighborhood does it.

One neighbor with 2 kids in elementary school age just resigned for 2 more years. They agreed to paint the house if rent did not go up


Based on talks with another neighbor that was renting i think theyre renting for $3,500 to $3,800 per month.

My mortgage for the same house is $2,900


Paycheck to paycheck country.
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bmks270
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In reply to jamey • 7:30p, 5/23/26
AG
jamey said:
If you rent a property similar to what you own, it also includes taxes, interest and everything else you get as a home owner, plus a little profit. Nobody is renting their property for charity

Yiu can rent a lesser property for less but an equivalent property is going to cost more than a mortgage

Taxes and insurance..etc arent add ons to ownership. Theyre just bundled into rent


This isn't always true. With higher interest rates, if landlords purchased a property during lower interest rate environment and at lower prices than today, landlords can make a profit at a lower monthly rent rate than it would cost to purchase.

You also have to look at the opportunity cost of the down payment over 20-40 years. Typically the mortgage gives you leverage where real estate gains will beat investment gains, but if the local real estate growth is flat and we're in a huge bull market for equities, then 100-200k might earn more in equities than the leverage gives in home value appreciation.

Also, like equities, home values can go down.

Also, the job market is more turbulent than ever. If you buy and lose your job and have to sell within 5 years you may lose a lot on closing costs, or be forced to list it for rent at a loss. And who can be assured their current job is secure for the next 5 years outside of maybe MDs and dentist?
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ToddyHill
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8:18p, 5/23/26
AG
Quote:
My mortgage for the same house is $2,900

That is INSANE!

To each his own, and I am not going to say to pay off a mortgage or not as that is a very personal decision. I'm old and retired, so having a house that is paid off is a point of comfort for me.

I have daughters with house payments along the lines of that. I just don't know how one does that. Obviously, salaries are much higher than what I made in my day, but it still freaks me out when I see stuff like that.



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jamey
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In reply to bmks270 • 8:29p, 5/23/26
AG
bmks270 said:
jamey said:
If you rent a property similar to what you own, it also includes taxes, interest and everything else you get as a home owner, plus a little profit. Nobody is renting their property for charity

Yiu can rent a lesser property for less but an equivalent property is going to cost more than a mortgage

Taxes and insurance..etc arent add ons to ownership. Theyre just bundled into rent


This isn't always true. With higher interest rates, if landlords purchased a property during lower interest rate environment and at lower prices than today, landlords can make a profit at a lower monthly rent rate than it would cost to purchase.

You also have to look at the opportunity cost of the down payment over 20-40 years. Typically the mortgage gives you leverage where real estate gains will beat investment gains, but if the local real estate growth is flat and we're in a huge bull market for equities, then 100-200k might earn more in equities than the leverage gives in home value appreciation.

Also, like equities, home values can go down.

Also, the job market is more turbulent than ever. If you buy and lose your job and have to sell within 5 years you may lose a lot on closing costs, or be forced to list it for rent at a loss. And who can be assured their current job is secure for the next 5 years outside of maybe MDs and dentist?


I was very patient before buying a home. Backed out of buying my first home in 2005 in Phoenix after seeing early signs of a housing bubble. I only look in places where i could reach the far corners of the metroplex for work if needed to job hunt. I bought within 200 yards of the highway...etc for this reason. After buying in 2012 I kept an eye on interest rates and refinanced..etc. Sold and bought another house about 10 yrs ago, to upgrade


Im not saying you just throw a dart at a map and buy whatever wherever and whenever.


But I know rent goes up forever and you have to live somewhere anyway. A large chunk is a sunk cost unless you're ok living in your car. Might as well get some equity out of it, and significantly reduce cost of living in retirement whwn the house is paid off

In 10 years my downpayment amount has doubled in housing equity, since the downpayment goes up by the value of the whole house not just the down payment if it were put into the market.


My 100K down on a 425K house is now worth 625K. A standard 7-11 rule doubles my 100K. So thats about a wash


Then theres just the idea of diversification and the house helps on that front
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EliteZags
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In reply to jamey • 9:49p, 5/23/26
AG
well if you're gonna comp to a specific time period on the house then the market is >4x over that period
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jamey
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In reply to EliteZags • 10:03p, 5/23/26
AG
EliteZags said:
well if you're gonna comp to a specific time period on the house then the market is closing in on a 4x over that period


Ok, let's go with the 100K turning into 400K in the market but only 200K as housing equity. So 200K less in a decade.


My monthly housing cost drops in half in another 10 years, and by then the whole house is paid off and even if the price of the house doesn't go up at all, I'll have 625K in equity for emergency use or whatever else i want to do with
it.

I'll take the diversification, garunteed low housing cost at retirement age and a nice chunk of housing equity, even if its less than it would have been in market performance

Who knows, maybe we have a lost decade in the market like Japan did when their spending got out of control. I'm a believer in the debasement trade and out of control gov spending has been my #1, 2 and 3 political issues since before I bought a house. Its one of the reasons I wanted that paid off safety net. If the **** really hits the fan economically, my daughter and 2 step daughters can all live here and we can find whatever work we can to pay bills
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AgLA06
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In reply to ToddyHill • 11:44p, 5/23/26
AG
ToddyHill said:
Quote:
My mortgage for the same house is $2,900

That is INSANE!

I just don't know how one does that.



Welcome. It's why so many under 40 are up in arms on the outrageous cost of living and inflation without the compensation to match.

It's also a big part of what makes the older generations so out of touch with the realities of today. The American dream (and way of life) as they knew it is much less attainable today.

Quote:

Obviously, salaries are much higher than what I made in my day, but it still freaks me out when I see stuff like that.


No where near high enough to keep up. In my lifetime alone the median price of homes has gone up almost twice as much as median income.

More so in larger cities. In my area of Houston, home prices are 4x what they were on 2000. You know amy industries paying 4x in the last 25 years?
https://www.statista.com/chart/34534/median-house-price-versus-median-income-in-the-us/
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jamey
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In reply to AgLA06 • 12:08a, 5/24/26
AG
AgLA06 said:
ToddyHill said:
Quote:
My mortgage for the same house is $2,900

That is INSANE!

I just don't know how one does that.



Welcome. It's why so many under 40 are up in arms on the outrageous cost of living and inflation without the compensation to match.

It's also a big part of what makes the older generations so out of touch with the realities of today. The American dream (and way of life) as they knew it is much less attainable today.

Quote:

Obviously, salaries are much higher than what I made in my day, but it still freaks me out when I see stuff like that.


No where near high enough to keep up. In my lifetime alone the median price of homes has gone up almost twice as much as median income.

More so in larger cities. In my area of Houston, home prices are 4x what they were on 2000. You know amy industries paying 4x in the last 25 years?
https://www.statista.com/chart/34534/median-house-price-versus-median-income-in-the-us/



Im not so sure how true that is. I work with a girl who makes about 85K a year. She's 25 and lives with her parents. She just got back from a week in Rome for a friend's marriage and already has plans to go to Destin Florida soon and back to Europe next year


She says she can't ever own a home, American dream is over for her generation...etc like you are saying.


Meanwhile I never took a vacation longer than a few days prior to marriage around age 46, certainly did not take big vacations to Rome or even as much as Destin Florida


I think its more fair to say the younger generation prioritizes working to live over living to work and has the vacation and other budget to back up that choice. Its also a hindrance to buying a home but its a choice

Current mortgage rates, thiugh higher than 2010 to 2022 or so, is still at historic lows otherwise. Income to price ignores all the years where mortgage rates were 8 to 16%

Also, a big part of the salary vs wage issue is houses are bigger, like 2 to 3 X bigger than they use to be. I grew up in a 1400 sq ft house and that was just a regular house in the 1970s

They're starting to go back to building smaller houses. Lots 9f them locates north of DFW for example with prices starting around 300K brand new
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AgLA06
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In reply to jamey • 9:10a, 5/24/26
AG
That's a lot of isolated subjective examples. It doesn't match the real numbers across American right now. And several don't bolster you argument as you think.

Bigger houses generally only applies to new houses way out in the burbs. They are building those to try and entice people to live out there in an effort to get them to drive huge commutes your generation never saw. Why? They don't want to live out there, but they can't afford to live where they want. The big house is the final cookie to get them to buy an overpriced new house. Most people are still living in and buying the same houses as you could. My neighborhood and the examples provided was developed in the 1970s.

Not sure if you've noticed the resurgence in RVs and road trips. There's a reason for that. Again anecdotal at best to say the public is represented by travel influencers.

Your mortgage rate example kills your argument. Lending money is historically cheap, but can't counter the historic inflation, high home prices,and increased cost of living. Especially when the oil embargo decade was a huge outlier of outrageous interest rates that drastically skew the numbers.

Those smaller houses for $300k, how does that price compare to a similar new house when you graduated college? That's right, exponentially more expensive.
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YouBet
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9:20a, 5/24/26
AG
Regarding urban cores, I'm not sure how you counteract basic supply and demand. Getting mad about the prices of homes there is a screaming into the void.
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GeorgiAg
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In reply to jsc8116 • 9:21a, 5/24/26
AG
jsc8116 said:
I might be in the minority but I have owned 2 homes in the past 20 years. I can't wait until we downsize and just rent somewhere that I don't have to worry about upkeep/maintenance, taxes, etc. Just stressful. Yes, I did rent for several years before me and wife had kids so I know the cons of that as well. I am willing to sacrifice the built up equity for the convenience of being able to have less home ownership crap to worry about in my golden years.


I got divorced in my mid forties. Sold two houses in the process and rented a corner penthouse in Atl. Rent was high and I paid a premium for the best parking spot in the building. But I came home on Friday and didn't move my car until Monday. Zero maintenance, no yard work and I could clean the place from top to bottom in about an hour. Really about 30 minutes. Robot vacuum/mop. When you factor in all the ancillary costs of home ownership, it wasn't really that expensive. Whole Foods in walking distance. 100s of amazing restaurants a walk or short Uber away. Concerts, sporting events, theater, subway to the airport, etc.

It was liberating.

Got remarried and now I'm on 25 acres with a 4500 sq ft house and a four car, two cars deep size barn. This is fun too but a crap ton of work/expense. Just replaced HVAC for $40k. But after my stepson graduates we will be looking to downsize in a few years. 2.9% mortgage so no rush.
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jh0400
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In reply to jamey • 10:02a, 5/24/26
AG
jamey said:
Heineken-Ashi said:
jamey said:
If you rent a property similar to what you own, it also includes taxes, interest and everything else you get as a home owner, plus a little profit. Nobody is renting their property for charity

Yiu can rent a lesser property for less but an equivalent property is going to cost more than a mortgage

Taxes and insurance..etc arent add ons to ownership. Theyre just bundled into rent

In theory, yes.

But the market will pay what the going rate is. Plenty of landlords are struggling right now as rising taxes and insurance CAN'T be priced in.


Over the course of a lifetime(call it 50 years on average) of renting vs owning similar properties, the owner is going to pay less per month on average, plus keep the equity


Less per month on average if you compare rent vs PITI, but that excludes the other large expenditures that can come with owning a home. Over the last eight years of ownership, we've had to spend $25,000 to have our hardwood floors replaced after discovering powderpost beetles, $40,000 for foundation repair work, and $15,000 for an underslab plumbing repair. Any appreciation that we get is going to be almost completely offset by those repairs. I may buy another house at some point once we sell this one, but there have been lots of days where I feel like I'd be willing to trade the headaches for a rent payment that was $1,500 to $2,000 more than our current mortgage payment.
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jamey
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In reply to jh0400 • 11:31a, 5/24/26
AG
jh0400 said:
jamey said:
Heineken-Ashi said:
jamey said:
If you rent a property similar to what you own, it also includes taxes, interest and everything else you get as a home owner, plus a little profit. Nobody is renting their property for charity

Yiu can rent a lesser property for less but an equivalent property is going to cost more than a mortgage

Taxes and insurance..etc arent add ons to ownership. Theyre just bundled into rent

In theory, yes.

But the market will pay what the going rate is. Plenty of landlords are struggling right now as rising taxes and insurance CAN'T be priced in.


Over the course of a lifetime(call it 50 years on average) of renting vs owning similar properties, the owner is going to pay less per month on average, plus keep the equity


Less per month on average if you compare rent vs PITI, but that excludes the other large expenditures that can come with owning a home. Over the last eight years of ownership, we've had to spend $25,000 to have our hardwood floors replaced after discovering powderpost beetles, $40,000 for foundation repair work, and $15,000 for an underslab plumbing repair. Any appreciation that we get is going to be almost completely offset by those repairs. I may buy another house at some point once we sell this one, but there have been lots of days where I feel like I'd be willing to trade the headaches for a rent payment that was $1,500 to $2,000 more than our current mortgage payment.



We've had some repairs too over the last decade. But the $600 to $900 less Im paying on my mortgage vs what my neighbors pay for renting the same house more than makes up for it.

We've probably spent about 6K on a several AC repairs, and we currently need a new oven so call that another $2,500
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jh0400
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In reply to jamey • 12:18p, 5/24/26
AG
I forgot about the $12,000 AC unit as well. I'm almost positive that I'm underwater without including the opportunity cost of the 20% I put down and definitely underwater with that in the calculation.
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jamey
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1:08p, 5/24/26
AG
On the other side of the mortgage is where a lot is made up, plus the equity

Once paid off, in today's dollars my escrow for taxes and insurance alone, would cost me $1,480 per month while my renter neighbors still pay at least 3500 or 24K per year more in monthly recurring costs. Ill also be 65 so much of the taxes get frozen at that point. Rent will continue up over 20 year average

Say I live to 85 like both parents so far that 24K x 20 from age 65 to 85 or 480,000
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