I’ve dealt with 4 or 5 mortgage companies throughout my life, and I’ve never had to direct them where to apply the overage. It’s always automatically gone towards the principal. Same goes for every car loan – except the first – that I’ve ever had.
melody does make a good point about watching your bank like a hawk and never assuming anything, though.
You know, since there is a second round of sub-prime mortgages about to come due soon, maybe holding off on buying would be a good idea after all.
What part of “around here” made you think I wasn’t talking about my neck of the woods? My point – which you seem to have needlessly duplicated – was that terminology varies, so advising someone about a townhouse in Canada (or Michigan) will be different from advising someone about a townhouse in Virginia.
One more tip- you want a 30-year fixed-rate mortgage. Accept no substitutes. If you can’t afford a house with a 30-year fixed-rate mortgage, you can’t afford it period. This is more true than ever now, with interest rates being as low as they are.
Dude, don’t be so defensive when someone is trying to educate you. Remember when you wrote “Maybe things are different in Canada”? You wrote that. It’s up above several posts. Now you’re no longer stupid about terminology in Michigan or Ontario (which is a part of Canada, which is a country). Now you don’t ever have to wonder, “Maybe things are different in Canada.” :rolleyes:
There are significant lifestyle differences between renting and owning. I don’t think one of those lifestyles is better than the other for everybody. Some people do, but I think they are ignorant. Be honest with yourself about what kind of lifestyle you want. If you want the kind of lifestyle that is more compatible with renting than owning, don’t buy a house.
OTOH, just because you own your house doesn’t mean you have to do your own yard work and maintenance. There are people who will do these things for you, but they generally do expect to be paid for it.
You won’t magically become handy if you buy a house. You don’t automatically learn how to fix stuff when you sign the mortgage paperwork.
You’ll be basically the same person after you buy a house as you were before. If you hated housework before you bought a house, chances are you’ll still hate it. If you weren’t interested in gardening, it’s likely that you still won’t be. If you didn’t tend to stay in a job for very long, you’ll probably still have that tendency. You don’t magically become more financially responsible when you buy a house, as millions of people have recently learned the hard way. There are exceptions to all of these, but I suspect the ones that do follow these rules outnumber them. It’s a mistake to buy a house thinking it will make you “grow up” somehow.
Nice link, Anne Neville.
Reading that article brought to mind that I’m super lucky that my husband happens to actually kind of like fixing up the house and the yard, and in general (at least by my standard… my family isn’t into anything that involves tools) is pretty knowledgeable about it (he’s always explaining something to me about how the wiring works in the attic, or what’s going on with the water pipes, or something). Knowing what I know now about owning a house, if I were single or married to someone who was NOT extremely handy like that, I’d probably plump for renting an apartment where I could call someone up to take care of all of that.
As for the mortgage, we read our mortgage agreement closely, and it actually says in it that additional payments will not be applied towards the next month’s interest, but rather towards the principal. Apparently (according to our loan officer) this is standard.
And, what Cat Whisperer said.
Ah, if only every post ended like this. 
You know, Anne, I never think of hiring people to do stuff. Yeah, if you like the look of a nice yard but don’t want to do it, sure, there are people to hire to do that for you. I amend my statement to, "Either like doing yard work and maintenance, or be able to hire people to do it for you."
When you’re setting up your payment schedule for your mortgage, if you go bi-weekly instead of monthly (i.e. 26 payments a year instead of 12), it will take years and thousands of dollars off your mortgage right there.
I think that looking at a house as an investment, rather than as a form of consumption, is a bad idea.
If you make money on the deal, that’s great, but you should not count on it.
I rented for a decade. We liked our apartment and our landlords a lot; we had to move though, because we had a baby on the way and our apartment simply was not equipped in the manner to allow for comfortable baby-rearing. Plus, we always wanted a house.
I was 38 when I bought for the first time.
No, I think the issue is whether you have sufficient savings for a significant down-payment (enough to avoid having to pay for insurance) and an income-stream sufficient to support your mortgage, plus expenses.
iamthewalrus(:3= makes a good point - this is an important and often overlooked aspect of home ownership. If rent is $1,000 per month and a mortgage is $1,200 per month, very few people have the discipline to consistently invest the $200 difference every month.
Been married 32 years and rented a total of 2 years. When we were first together at 18 we rented for about 6 months then scraped together a down payment and bought a place. Second time was when we left my hometown and rented for a year. I dont like renting. I like gardening and doing work around the house. We didnt always make money but a couple times we doubled in a few years so overall we did very well. The house we are in now has gone up by 2.5 times. When my son left home we helped him get into a condo. That didnt make him any money but will end up being the same as renting for $520 a month. Which he cant do around here.
5 years or more.
Rented maybe 3 years. I purchased at age 23, under much pressure from family and friends. But that was a BIG mistake. I sold 2 years later, at 28% over selling price. Sound good, right? But adding up the selling fees, mortgage interest, the remodeling I had to do to get it to sell, etc etc I figured out that I lost money in this transaction than I would have by renting. I shudder for people who didn’t make the kind of obscene “profits” that I did, let alone got underwater.
No. I think the only reason mortgages are considered a sign of fiscal maturity is because Americans are just so financially immature that the only way that they can not throw out all their money is to borrow a huge sum of money from bank and be forced to plunk down a teensy bit of their mortgage payment in their equity piggy bank, and throw away the vast majority of it on interest, at gunpoint.
That’s an extremely germane point, too - a house is an investment that you live in. If the investment part doesn’t work out, you still have a place to live (unlike stocks and bonds). Our attitude towards our housing has always been that our house is first and foremost the roof over our head; if it happens to gain in value, that’s gravy.
I just wanted to comment on how happy this thread has made me.
I am sick of friends insisting that I must buy a home!
I HATE yard work. I Hate where I work. I HATE the thought of living in some rectangular enclosure set off from everyone.
I rent because I do not see myself in this area in 10 years.
I rent because I get to walk to my car after a significant snow storm and not care where a shovel is.
I rent because the difference in rent vs home ownership allows me to travel.
Someday, I am sure I will buy. I get insanely pissed when people make the own vs rent argument seem like it is the end all, as though it were gospel.
*I am 34 btw, left a career and now building a new one.
Here are some of the considerations for owning vs. renting. Since I married, we lived for two years in a rented apartment and then bought a small house. Two years later we sold it and moved to Canada. We rented an apartment for 3 1/2 years and then bought the house that we have lived in for 37 years.
You buy a house to live in, not to profit on. The latter is a mug’s game as recent experience has demonstrated.
Tax considerations. The tax code (in the US and, to a lesser extent in Canada) is set up to outragenously favor owning. When I move to Montreal, renters were not allowed to vote in municipal elections and the city had a special “renter’s tax” on the spurious grounds that renters paid no real estate tax. The province changed the first and then the second was quickly chainged. But the real thing is this. My house is assessed at $560,000. I think that is high, but leave that aside. That means I have $560,000 invested in real estate on which I make a considerable return (the cost of the rent I would otherwise pay) and on which I pay no income tax. Sure I pay real estate tax, but obviously so do renters. In the US, there is the added factor of deductibility of mortgage interest. In Switzerland, I understand (or at least in the canton of Zurich) the fair rental value of your property is added to your income.
When my daughter moved into a nice apartment in Brooklyn recently, it was clear that there are certain quite desirable improvements that could be made. But she and her husband will not make them because they are not the owners. She has been living in NYC apartments for 20 years and has moved six times, either to get a better place or, the last two times, to avoid a substantial rent increase. The last one, last October, was particularly galling because rents were dropping and the landlord insisted on a substantial increase.
I am getting to an age where the wonders of a garden are paling and the difficulties of routine maintenance are increasing. Yes, we can and do hire people to do it, but my income is shrinking with inflation and at some point I will take my half million and buy into a condo. Or maybe go right into a retirement facility.
That may be true for you, but the OP is posting from Saskatchewan, which is one of the few jurisdictions in North America that the recession has passed by. There are major housing developments going on in our two major cities. (We all smeared banker’s blood on our door frames in early 2008, and it seems to have worked. 
)
Also, the sub-prime disaster wasn’t replicated in Canada, because of stricter mortgage regulations. So, caution is advised, but it’s not nearly as gloomy up here as it is down south.
The first time I heard about what was going on in the US with sub-prime mortgages, I couldn’t believe what I was hearing. I’m no financial expert, but I knew that couldn’t possibly be a good idea.
If you’re not good at managing your finances, you can get in a lot of trouble as a homeowner with home equity loans (as many people have in the past few years). Those aren’t available to a renter, so they can’t get in deep financial doo-doo that way. Don’t buy a house because you think it will make you more financially responsible. It will give you more ways to be financially irresponsible.
This is another good point for home ownership: the “income” that you receive from owning your place of residence is not taxed. This isn’t as big a gain as you might think, though, since, of course, the average tax break is factored into the market price of real estate. You will make more gains if you pay more income taxes than the average person.
However, I also want to highlight a mistake that is incredibly common when discussing renting vs. owning: overcounting costs on one side or undercounting them on the other. In this case, you appear be counting your property “income” as the rent you would otherwise pay, but also claiming that renters pay property tax. You can’t really have it both ways. Either your house is only returning part of the rent you’d pay (the part of rent that doesn’t go to things like property taxes and upkeep), or renters don’t pay property tax.
Unless, as many people are discovering now, it really doesn’t work out, Unless you’re quite wealthy, buying a house involves taking on a substantial amount of debt, which can be quite risky. You’re heavily leveraged in the first few years of buying a house, which means that a 10-20% fall in prices can completely wipe you out. And, even if it doesn’t, the upside of owning a house that doesn’t perform as an investment is that you have the obligation of continuing to pay for it. In contrast, if all my stocks drop 20% tomorrow, I can quite happily continue paying my rent or, if I feel my financial situation has changed, I can move to a cheaper place with a month’s notice.
I own my own home. I love owning my own home. There is a distinct pride in ownership.
As a financial decision, in comparison with renting? It’s a complete wash.
Homes are terrible investments. Yes, you can get lucky-- a lot of people in the D.C. area did during the boom years, and managed to parlay relatively inexpensive home purchases into major sources of profit that many subsequently turned into even larger homes soon after.
Alas, I bought near the end of the boom. Thankfully not at the end-- I’m not underwater on my home-- but near enough to the end that any notion of “trading up” on my house is impossible.
What many prospective homeowners forget is just how ridiculously expensive and time-consuming owning a home can be. You are responsible for everything. The $$$ I’ve spent in six years of home ownership on Home Depot, Sears, Target, plumbers, electricians, roofers, landscapers, etc., etc., etc. is money I would have NEVER spent while renting. That’s money I may never get out of my house if/when I sell it. I certainly don’t get all the countless hours spent working on my home back.
What I tell my friends and family who are interested in owning a home is this: you trade one set of psychological rewards for another. Rent, and you can move when you want to, you don’t have to worry about things that homeowners worry about, and the money you save you can still invest (or spend on something other than a new fridge or furnace).
You own a home, your home also owns you. I’m fine with that-- again, I love it, as sick as it is-- but it is not now nor do I ever expect it to be a financial boon for me.
BTW, one of the best articles I’ve seen on renting vs. buying is this one, which persuasively argues that the historical financial return on a home “investment” is zero. A home is a place to live, it’s not an investment.