Geeze Doug, "having a mortgage" is only one side of the equation. A "mortgage payment" is (in a traditional mortgage, the most commonly held in the US) comprised of two pieces: an interest payment and a principal payment. That principal payment, sometimes called "equity", is money in a coffee can or in a mattress: it plays the role of a savings plan for many people.
Look at it this way: if you get an interest-only loan on your house and spend the next 30 years tucking money into a "savings account" then at some point you'll have enough money to pay back the principal all in one lump. You, uh, "saved" for your house. In the mean time, you got to live there.
> And a house is not a form of capital - it has no yield in
> the form of interest or profit.
I don't believe anyone said otherwise.
> At best, it offers the
> possibility of a speculative profit - which can only be
> meaningfully realized if you trade down to a smaller
> house or a cheaper market.
... which is exactly the kind of thing that many in the US think about as they approach retirement age.
I think there are other good things about buying a house:
- It's one of the few items that individuals can apply financial leverage to with the ultimate goal of avoiding rent. - It's tax-advantaged; the psychological aspect of this cannot be overstated - It generally freezes the cost of shelter (with a fixed loan) during the life of the mortgage
In 1973 my parents bought a house for $18,500. They got a conventional 30 year fixed loan for $17,000 at an interest rate of 14%. The monthly payment was just about $200. Ignoring any refinancing they could have taken advantage of (and at 14%, they surely would have), just two years ago they would have (had we not moved and had they not gotten divorced, but I digress) made the final $200 payment on a 4 bedroom house in a middle-class neighborhood.
Can you imagine paying $200/mo for a 4 bedroom house today? Can you imagine NOT PAYING ANYTHING per month for a 4 bedroom house today?
> I feel like I've stepped through the looking glass.
(I can't believe I have to explain a mortgage here)
/jordan