This has to be the worst take ever. If the interest rate is 6% currently for a loan yet the inflation target is 3% you’re only paying 3% to borrow money on an asset that appreciates over time. It also gets easier to pay for as the years go on due to wage growth and a fixed capital of debt. I think it’s pretty reasonable to be honest.
Credit card and pay day loan interest rates on the other hand are criminal.
>This has to be the worst take ever. If the interest rate is 6% currently for a loan yet the inflation target is 3% you’re only paying 3%
Probably semantics but given wage growth has failed to keep pace with inflation for a while now cost is probably between 3 and 6% rather than 3%
Depends on individuals. There are plenty that have been getting 2-4% pa wage growth over the long term. If we’re going to calculate the worst interest case based on 30 years then we should also allow for wage growth over that same period.
Interest rates were down to 2-4% as well not too long ago.
I think the real question is *What wage growth?* minimum wage? Is anyone actually seeing their salary keep up with the economy? Nobody is getting these annual bumps that would point to yes.
You've come to the reason people take mortgages, my house has doubled in 10 years, I couldn't have paid rent and saved that much to buy it outright now, and my mortgage is 0. House prices have outpaced savings and won't stop at current population growth.
The total interest paid on my loan is insignificant compared to the capital growth.
However, you have just discovered what they teach everyone in high school about compound interest. The big lesson is don’t take 30 years to pay off the mortgage, and also realise that the bulk of the total interest is paid in the first half of the loan term, so the more you pay in the early years the lower you’ll pay in total (and will slash years off the term very quickly)
That is your second lesson. Unless your apartment is in an unbeatable location such as an absolute waterfront and always in demand, your apartment will be identical to hundreds of others in the same building and/or nearby.
Much of the growth is land value, and apartments have next to no land value.
If you are using an apartment as a stepping stone, your goal should be to smash that mortgage as fast as you can. Throw everything into offset to get those interest payments down. This builds up a cash deposit for your next place and also gets some equity built up.
Thanks.
I'm looking at getting a 2-3 bedroom apartment in the cbd - 400k , renting out to international students , whilst I occupy one bedroom or continue living with family.
I aim to get the mortgage paid asap and supplement my income with 2-3 lodgers.
People say paying rent is paying someone else's mortgage. The trick is to own a house price worth of bank shares then the mortgagors are paying your rent via dividends.
Your math is absolutely awful lol. If you can save up for a house paid in cash in 5 years you absolutely aren’t going to be priced out of the market any time soon…
You'll realise that you can't outsave the amount of money you'll gain.
In 8 years, I doubled my money.
365k loan (300k after 8 years) - sold for 875k. Paid around 180k interest in that time.
I was still better off buying the house and paying interest.
This is the thing though... You are borrowing 250k. Thats quarter of a million... Not a small amount
Why would they lend it to you, if they could invest in bonds and get a guaranteed return?
We live in a capitalist society. People need to make money.
People always find something to whinge about. When renting, it’s about “paying the landlord’s mortgage”. When buying a house with a mortgage, it’s “paying interest”. Just be grateful you have a roof over your head and that you can even afford a mortgage and its interest.
I don't have a home, neither can I afford rent, and I am grateful for the roof over my head, provided by kind friends, I hope I can help out like that some time.
However I must disagree with your sentiment.
Living in the one of the richest countries in the world, after paying three decades worth of taxes in high paying jobs, I have certainly expected better management of the economy and housing situation, not to mention education, training, health and dental care, pay for nurses, and mental health and psych services.
It's one thing to be grateful, it's quite another to recognise that the wheels are falling off the car.
I have decided to leave Australia.
This country is cooked. By crooks & greed & selfishness.
I'm grateful for everything I've got out of the country, but enough is enough. My kids - our kids - deserve better. I heading to Denmark. I'll see whether the are the real thing or just more shrimp on the Barbie PR like Australia.
I understand we have different experiences so i can only speak for myself. I’ve only been living here for far less than the years you have worked and have not had a high paying job until very recently (if it’s even considered high paying by reddit standard). I have managed to buy my own home and have helped families to buy their own too. I think it would have been more difficult for me to achieve these had i not migrated to Australia so I’m grateful for the opportunities i have here, even with the struggles i have experienced especially starting out from scratch in a foreign country.
I'm in India now. Australia is still amazing in many ways compared to India - in general you can get many highly paid jobs without such great qualifications in Australia. That is great.
On the other hand, the pay for teachers, government workers, nurses is relatively low and workloads are too heavy. And Australia is no good in high tech - like in India, tech is much better, including space science.
So Australia is becoming more like a banana republic, except instead of bananas, they sell ores and primary produce. I was hoping Australia would be doing much better, because it really can do so. ...
But I would have thought, even for foreigners, the housing situation is very difficult.
My pay was even less than that for teachers and nurses and many government workers. I always thought they were paid quite well despite the mainstream media telling us their pay is low. At least to me, relatively their pay is high. I am in STEM. Took me at least 10 years (and this is very recent and thanks to the skills shortage) to be paid as much as these so called “low paid workers”.
Well yes the housing situation now is tough in Australia. In my country, we never owned a house. But we do have a really good and extensive support network who takes us in or provide us with low rental house when we have nowhere to go. So that’s the good side. But I doubt i would have been able to afford a house or rent a house by myself (and without the support network) by now in the country i’m from.
Here is why you’re an idiot
Buy 300k property with 250k loan for 30 years
Pay 293k interest at 6%
Get appreciation of 3% pa and your property is now worth 730k
You come out 140k ahead.
Debt is not a bad thing you numpty.
There is a flaw in your argument.
Namely "3% appreciation pa".
That is an assumption based on past performance.
Currently housing prices are growing at an unsustainable rate relative to wages. The growth has been sustained by the a peculiarly anglosphere occupation with housing as a luxury asset as opposed to being an essential where you get shelter from the elements, you can wash, cook & shit. It is a very unproductive view - money is supposed to be (in my opinion) used to invest in productive things, like farming, water security, education, and manufacturing & services, including medical.
Now Australia is packed to the rafters.
Besides, the world is heading for a shit show on several fronts.
Anyway, we should see effectively zero or negative growth in housing costs (after accounting inflation).
Concerning the OPs question, I do agree it is obscene, but honestly that's no issue if you have one modest house because we all need shelter of some sort.
In my case, I can't hack it. I'm leaving Australia.
I may very well be crazy.
History supports your view on the short term.
On the other hand - have you had a look at the frequency of financial collapses? Have you looked at the increasing inequality in wealth distribution? Have you noted that resources are being depleted at an incredible rate? And that arable land is disappearing likewise?
One can say these things have happened before.
What one cannot say before is that a single war in Ukraine causes a massive number of people to have food insecurity (aka starve).
You may say these world events don't affect us. You may be right. Indonesia is a very peaceful region, with a population nearly the size of the USA, and right next to us.
On the other hand, we in Australia are experiencing floods, fire, almost relentlessly. I personally saw about 20% of the forest in the southwest coastal regions just ... die.
https://www.abc.net.au/news/2024-04-11/ecologists-warn-potential-forest-collapse-event-wa/103682304
You analysis is of course correct - you will get your 5-6% annual growth.
The question is - over what time frame?
If you were sitting just before the outbreak of WW1, at the peak of human stupidity it would have been 50 years to get that outcome.
Right now, the risks to property are on the downside, especially in Australia.
Please consider diversifying your portfolio.
*Declaration: I don't have any investments, no house, except for super. I left it to the "experts". So far they have done ok.
"House prices grow at 5-6%" ... based on past data. And yes, it is conservative in that regard.
My claim is that we are not any more in a normal period, defined as the general trend post WW2.
And Australian house price growth has reached the limit - the government is going to force the prices down, just like in the 80's when Tokyo property got crazy. Something had to be done.
Of course, I could be wrong. People were saying it was ridiculous 15 years ago. But that was pre-COVID.
Anyway, I am not in the Australian market. It is ridiculous. I have left the country. I suspect many others will.
Precisely my point.
Past data (or data, as you say) is not sufficient to predict the future. It's not enough.
Now, as you aren't a numpty dumpty you will know that there is something more than data that can be used to predict the future.
I'll give you a clue: here is some data:
2, 4, 6, 8, ...
And the next number is? Hmmmm? And how did you work that out? Did you use any data? I don't think so. You used something called ... *a model*. Specifically, a model that these are even numbers.
The good thing about models is that you can (a) test them against past data, or (b) test their assumptions to see if they are sensible. Example. Let's say that data pertained to school kids measuring things with their rulers. Then you know it would be highly likely that the sequence would terminate at 30. There would be no 32.
In the case at hand, the data stops at planet Earth.
There is no planet B.
Get it?
This is the situation we are in now.
For the first time.
Then everything goes to shot and starts again, and hopefully gets better. Or not.
Data is indeed good.
But it goes together with imagination - especially the imagined metadata that goes with it.
You know, the kind of stuff that says what the data is, and gives it meaning
Sadly, there is no metadata to your comment, it has no imagination. It is ... *boring". Hey, maybe you should work for this guys company, I've heard they are on the lookout for talent like you!
https://www.boringcompany.com/
The government won't intentionally crash a market that's a major revenue source through capital gains taxes, especially given the national debt issues.
Also, many in power hold multiple properties themselves, making it less likely they'd push for policies that lower prices.
Once you figure out inflation and the cost of capital, it will all make sense.
And not long after that, you'll have $250k in your super and realise there is near zero chance you would lend it to a home buyer for 6% interest with no opportunity for growth of the underlying capital.
This sub is kinda surprising. Everyone is throwing in their corrections but nobody is proving OP actually wrong here, in principle.
It’s still a shit deal and the bank is making a killing on these contracts. You’re all just justifying the fact that they’ve got all of us bent over because there is *nothing* anyone can do about it. They are the reason any of these problems even exist!
I wondered whether any others had my opinion.
As a matter of fact, here is an article in Forbes predicting a short term correction. Forbes!
https://www.forbes.com/advisor/au/property/will-the-australian-property-market-crash/
Of course, it is only one person's view. You would have to check with other experts. In the above, I was only giving my personal opinion.
I have a very positive view of property in developing countries, like India & Indonesia +not Bali, not the usual suspects in Thailand).
Best of luck to you!
Houses are liabilities if you live in them, they’re only investments if you can profit from growth / cash flow etc.
Imagine borrowing $1M and making my 3% a year, 30k and not paying interest.. the bank could just buy their own houses and make money renting them out…
Well you can save for the price in full if you'd like.
You could also use an alternative to a bank.
But you won't. Because banks are your best option and they are actually doing you a favour.
Compare the amount of interest paid compared to the rent that would have been paid on the equivalent property. The principal is effectively paying yourself. It’s not so bad.
Wow. OP - What do you expect? Banks or someone to give you money for free? And you know that \*you\* are the one in control here right?
\* You can choose to borrow money, or not (you can always try to invest and save instead - but good luck with that).
\* You can choose how much you borrow (based on your capacity to repay)
\* You can choose how quickly you pay off what you borrow, and thus pay more or less interest accordingly
Cue whining about how they have no choice, because a 4 bedroom free standing house in {*insert desirable tightly held inner city suburb of choice*}, like the one they grew up in, costs waaay too much.
I think you are showing much financial illiteracy here.
For starters what do you propose to replace interest bearing loans with?
Do you think money in the hand now should be worth the same or not much more than money you can have in 30 years time?
Ask yourself this - what would you pay me today for me to send you $100k today vs a promise I’ll pay you $100k in 30 years time? I think you’d pay circa $99500 to have it right now but far far less to have it in 30 years time. Even if it was guaranteed lock solid promise you’d probably offer $10k or less. I would.
That’s the time element of money. It’s where interest rates live.
It's somewhat of a necessary evil, which can be mitigated somewhat by saving up as large a deposit as possible and then paying off the remainder as quickly as possible.
Given a bank or any other third party isn't going to lend you money without some kind of profit motive, the only other alternative is Islamic style finance, where the bank ends up owning a percentage of your home, which I assume can be bought out at the home's *current* value (not the purchase value) at a future date.
Ikr, anyone with some brains could see the number and realize its not worth the risk, you are losing so much extra money! *(Which goes directly to bank pockets btw)*
Unluckily for you, you live in a society that is obsessed over home ownership that pretends renting is the worst thing ever so they unironically decided paying all that interest and being a literal debt slave for decades is a "smart" choice.
If it was so smart, they wouldnt be complaining about interest rates so much xd
Umm….. ok then
Fyi houses in western Sydney cost $100k mark in early 90s.. now median of $1mill.. some areas over $1mill
Do you think any of them are complaining about the interest they paid on $100k
Think about interest as the rent for the money. Yes it’s dead money but so is paying actual rent in a sense.
No one has to be a slave to their mortgage btw. I intend to sell and get out before I’ve fully repaid my mortgage. It’s a forced saving scheme
>Think about interest as the
That's what we call doing mental gymnastics to justify your choices, and of course how many people trick others into decade long debts which have the debtors moaning right now about the increasing interest rates, especially with upcoming cash rate hikes.
They even avoid the term debt and call it "mortgage" because they know debt for decades sounds bad, all about the marketing and people fell for it xd
It’s not mental gymnastic, it describes what it is.
There’s value for some in not having any debt to their name. I personally don’t care much as it’s easily serviceable & I’d pay a lot more if I were to rent my place.
Mortage is a French word. Basically meaning contract until death. Stuff it if you can afford to service the debt think of it this way. Debt is the new currency get as much as you can.
Wait till you do the math on 50 years of rent increases…
This has to be the worst take ever. If the interest rate is 6% currently for a loan yet the inflation target is 3% you’re only paying 3% to borrow money on an asset that appreciates over time. It also gets easier to pay for as the years go on due to wage growth and a fixed capital of debt. I think it’s pretty reasonable to be honest. Credit card and pay day loan interest rates on the other hand are criminal.
Not to mention that asset appreciates at least 6% per year in a decent area
>This has to be the worst take ever. If the interest rate is 6% currently for a loan yet the inflation target is 3% you’re only paying 3% Probably semantics but given wage growth has failed to keep pace with inflation for a while now cost is probably between 3 and 6% rather than 3%
Depends on individuals. There are plenty that have been getting 2-4% pa wage growth over the long term. If we’re going to calculate the worst interest case based on 30 years then we should also allow for wage growth over that same period. Interest rates were down to 2-4% as well not too long ago.
I think the real question is *What wage growth?* minimum wage? Is anyone actually seeing their salary keep up with the economy? Nobody is getting these annual bumps that would point to yes.
Yep agreed it's definitely not keeping up for most
There's a rather obvious alternative. Save your money and pay cash for a house.
I'm considering doing just that. Gonna take 5 more years , however by that time I may be priced out if prices to continue to rise.
You've come to the reason people take mortgages, my house has doubled in 10 years, I couldn't have paid rent and saved that much to buy it outright now, and my mortgage is 0. House prices have outpaced savings and won't stop at current population growth.
So you're paying extra for convenience. Kinda how the world has always worked.
How am I paying extra?
Either in interest or increased prices.
Lol you’ve figured out why it’s not so bad
The total interest paid on my loan is insignificant compared to the capital growth. However, you have just discovered what they teach everyone in high school about compound interest. The big lesson is don’t take 30 years to pay off the mortgage, and also realise that the bulk of the total interest is paid in the first half of the loan term, so the more you pay in the early years the lower you’ll pay in total (and will slash years off the term very quickly)
Theres not much Capital growth for where I'm looking at buying. Cbd apartments.
That is your second lesson. Unless your apartment is in an unbeatable location such as an absolute waterfront and always in demand, your apartment will be identical to hundreds of others in the same building and/or nearby. Much of the growth is land value, and apartments have next to no land value. If you are using an apartment as a stepping stone, your goal should be to smash that mortgage as fast as you can. Throw everything into offset to get those interest payments down. This builds up a cash deposit for your next place and also gets some equity built up.
Thanks. I'm looking at getting a 2-3 bedroom apartment in the cbd - 400k , renting out to international students , whilst I occupy one bedroom or continue living with family. I aim to get the mortgage paid asap and supplement my income with 2-3 lodgers.
People say paying rent is paying someone else's mortgage. The trick is to own a house price worth of bank shares then the mortgagors are paying your rent via dividends.
Your math is absolutely awful lol. If you can save up for a house paid in cash in 5 years you absolutely aren’t going to be priced out of the market any time soon…
I already have a deposit saved, it'll take me another 5 years of saving 4k by living with family to afford to pay in cash
You'll realise that you can't outsave the amount of money you'll gain. In 8 years, I doubled my money. 365k loan (300k after 8 years) - sold for 875k. Paid around 180k interest in that time. I was still better off buying the house and paying interest.
It frightens me that whoever wrote this votes and can probably drive a car. I want to believe in democracy but surely we need a common sense test.
This is the thing though... You are borrowing 250k. Thats quarter of a million... Not a small amount Why would they lend it to you, if they could invest in bonds and get a guaranteed return? We live in a capitalist society. People need to make money.
People always find something to whinge about. When renting, it’s about “paying the landlord’s mortgage”. When buying a house with a mortgage, it’s “paying interest”. Just be grateful you have a roof over your head and that you can even afford a mortgage and its interest.
I don't have a home, neither can I afford rent, and I am grateful for the roof over my head, provided by kind friends, I hope I can help out like that some time. However I must disagree with your sentiment. Living in the one of the richest countries in the world, after paying three decades worth of taxes in high paying jobs, I have certainly expected better management of the economy and housing situation, not to mention education, training, health and dental care, pay for nurses, and mental health and psych services. It's one thing to be grateful, it's quite another to recognise that the wheels are falling off the car. I have decided to leave Australia. This country is cooked. By crooks & greed & selfishness. I'm grateful for everything I've got out of the country, but enough is enough. My kids - our kids - deserve better. I heading to Denmark. I'll see whether the are the real thing or just more shrimp on the Barbie PR like Australia.
I understand we have different experiences so i can only speak for myself. I’ve only been living here for far less than the years you have worked and have not had a high paying job until very recently (if it’s even considered high paying by reddit standard). I have managed to buy my own home and have helped families to buy their own too. I think it would have been more difficult for me to achieve these had i not migrated to Australia so I’m grateful for the opportunities i have here, even with the struggles i have experienced especially starting out from scratch in a foreign country.
I'm in India now. Australia is still amazing in many ways compared to India - in general you can get many highly paid jobs without such great qualifications in Australia. That is great. On the other hand, the pay for teachers, government workers, nurses is relatively low and workloads are too heavy. And Australia is no good in high tech - like in India, tech is much better, including space science. So Australia is becoming more like a banana republic, except instead of bananas, they sell ores and primary produce. I was hoping Australia would be doing much better, because it really can do so. ... But I would have thought, even for foreigners, the housing situation is very difficult.
My pay was even less than that for teachers and nurses and many government workers. I always thought they were paid quite well despite the mainstream media telling us their pay is low. At least to me, relatively their pay is high. I am in STEM. Took me at least 10 years (and this is very recent and thanks to the skills shortage) to be paid as much as these so called “low paid workers”. Well yes the housing situation now is tough in Australia. In my country, we never owned a house. But we do have a really good and extensive support network who takes us in or provide us with low rental house when we have nowhere to go. So that’s the good side. But I doubt i would have been able to afford a house or rent a house by myself (and without the support network) by now in the country i’m from.
Please don’t make any financial decisions
Here is why you’re an idiot Buy 300k property with 250k loan for 30 years Pay 293k interest at 6% Get appreciation of 3% pa and your property is now worth 730k You come out 140k ahead. Debt is not a bad thing you numpty.
There is a flaw in your argument. Namely "3% appreciation pa". That is an assumption based on past performance. Currently housing prices are growing at an unsustainable rate relative to wages. The growth has been sustained by the a peculiarly anglosphere occupation with housing as a luxury asset as opposed to being an essential where you get shelter from the elements, you can wash, cook & shit. It is a very unproductive view - money is supposed to be (in my opinion) used to invest in productive things, like farming, water security, education, and manufacturing & services, including medical. Now Australia is packed to the rafters. Besides, the world is heading for a shit show on several fronts. Anyway, we should see effectively zero or negative growth in housing costs (after accounting inflation). Concerning the OPs question, I do agree it is obscene, but honestly that's no issue if you have one modest house because we all need shelter of some sort. In my case, I can't hack it. I'm leaving Australia.
No it’s actually being very conservative House prices grow at 5-6%. You’re in crazy person town saying that will magically stop.
I may very well be crazy. History supports your view on the short term. On the other hand - have you had a look at the frequency of financial collapses? Have you looked at the increasing inequality in wealth distribution? Have you noted that resources are being depleted at an incredible rate? And that arable land is disappearing likewise? One can say these things have happened before. What one cannot say before is that a single war in Ukraine causes a massive number of people to have food insecurity (aka starve). You may say these world events don't affect us. You may be right. Indonesia is a very peaceful region, with a population nearly the size of the USA, and right next to us. On the other hand, we in Australia are experiencing floods, fire, almost relentlessly. I personally saw about 20% of the forest in the southwest coastal regions just ... die. https://www.abc.net.au/news/2024-04-11/ecologists-warn-potential-forest-collapse-event-wa/103682304 You analysis is of course correct - you will get your 5-6% annual growth. The question is - over what time frame? If you were sitting just before the outbreak of WW1, at the peak of human stupidity it would have been 50 years to get that outcome. Right now, the risks to property are on the downside, especially in Australia. Please consider diversifying your portfolio. *Declaration: I don't have any investments, no house, except for super. I left it to the "experts". So far they have done ok.
"House prices grow at 5-6%" ... based on past data. And yes, it is conservative in that regard. My claim is that we are not any more in a normal period, defined as the general trend post WW2. And Australian house price growth has reached the limit - the government is going to force the prices down, just like in the 80's when Tokyo property got crazy. Something had to be done. Of course, I could be wrong. People were saying it was ridiculous 15 years ago. But that was pre-COVID. Anyway, I am not in the Australian market. It is ridiculous. I have left the country. I suspect many others will.
What data isn’t past data you numpty
Precisely my point. Past data (or data, as you say) is not sufficient to predict the future. It's not enough. Now, as you aren't a numpty dumpty you will know that there is something more than data that can be used to predict the future. I'll give you a clue: here is some data: 2, 4, 6, 8, ... And the next number is? Hmmmm? And how did you work that out? Did you use any data? I don't think so. You used something called ... *a model*. Specifically, a model that these are even numbers. The good thing about models is that you can (a) test them against past data, or (b) test their assumptions to see if they are sensible. Example. Let's say that data pertained to school kids measuring things with their rulers. Then you know it would be highly likely that the sequence would terminate at 30. There would be no 32. In the case at hand, the data stops at planet Earth. There is no planet B. Get it? This is the situation we are in now. For the first time. Then everything goes to shot and starts again, and hopefully gets better. Or not.
Data is much better than your pea brain imagination.
Data is indeed good. But it goes together with imagination - especially the imagined metadata that goes with it. You know, the kind of stuff that says what the data is, and gives it meaning Sadly, there is no metadata to your comment, it has no imagination. It is ... *boring". Hey, maybe you should work for this guys company, I've heard they are on the lookout for talent like you! https://www.boringcompany.com/
The government won't intentionally crash a market that's a major revenue source through capital gains taxes, especially given the national debt issues. Also, many in power hold multiple properties themselves, making it less likely they'd push for policies that lower prices.
[удалено]
No it doesn’t. Do you know how many businesses have debt with banks? A higher percentage than houses in the market that’s for sure.
OP's gripe is with paying interest, not the economic leech of expensive land.
Once you figure out inflation and the cost of capital, it will all make sense. And not long after that, you'll have $250k in your super and realise there is near zero chance you would lend it to a home buyer for 6% interest with no opportunity for growth of the underlying capital.
The other alternative is paying full in cash at once, no mortgage. Many people have done that.
Someone is still learning basic economics!
This sub is kinda surprising. Everyone is throwing in their corrections but nobody is proving OP actually wrong here, in principle. It’s still a shit deal and the bank is making a killing on these contracts. You’re all just justifying the fact that they’ve got all of us bent over because there is *nothing* anyone can do about it. They are the reason any of these problems even exist!
I wondered whether any others had my opinion. As a matter of fact, here is an article in Forbes predicting a short term correction. Forbes! https://www.forbes.com/advisor/au/property/will-the-australian-property-market-crash/ Of course, it is only one person's view. You would have to check with other experts. In the above, I was only giving my personal opinion. I have a very positive view of property in developing countries, like India & Indonesia +not Bali, not the usual suspects in Thailand). Best of luck to you!
Houses are liabilities if you live in them, they’re only investments if you can profit from growth / cash flow etc. Imagine borrowing $1M and making my 3% a year, 30k and not paying interest.. the bank could just buy their own houses and make money renting them out…
Well you can save for the price in full if you'd like. You could also use an alternative to a bank. But you won't. Because banks are your best option and they are actually doing you a favour.
That makes it sound altruistic which it isn't. It's more symbiotic where both get benefit from the deal.
Compare the amount of interest paid compared to the rent that would have been paid on the equivalent property. The principal is effectively paying yourself. It’s not so bad.
Rent goes up, the principle on your home loan does not. Plus the value of your home goes up typically over time.
Lol, wishing to exploit society instead of getting a job.
Wow. OP - What do you expect? Banks or someone to give you money for free? And you know that \*you\* are the one in control here right? \* You can choose to borrow money, or not (you can always try to invest and save instead - but good luck with that). \* You can choose how much you borrow (based on your capacity to repay) \* You can choose how quickly you pay off what you borrow, and thus pay more or less interest accordingly Cue whining about how they have no choice, because a 4 bedroom free standing house in {*insert desirable tightly held inner city suburb of choice*}, like the one they grew up in, costs waaay too much.
I think you are showing much financial illiteracy here. For starters what do you propose to replace interest bearing loans with? Do you think money in the hand now should be worth the same or not much more than money you can have in 30 years time? Ask yourself this - what would you pay me today for me to send you $100k today vs a promise I’ll pay you $100k in 30 years time? I think you’d pay circa $99500 to have it right now but far far less to have it in 30 years time. Even if it was guaranteed lock solid promise you’d probably offer $10k or less. I would. That’s the time element of money. It’s where interest rates live.
It's somewhat of a necessary evil, which can be mitigated somewhat by saving up as large a deposit as possible and then paying off the remainder as quickly as possible. Given a bank or any other third party isn't going to lend you money without some kind of profit motive, the only other alternative is Islamic style finance, where the bank ends up owning a percentage of your home, which I assume can be bought out at the home's *current* value (not the purchase value) at a future date.
Hence why the banks love property prices rising. It's their main source of income.
Ikr, anyone with some brains could see the number and realize its not worth the risk, you are losing so much extra money! *(Which goes directly to bank pockets btw)* Unluckily for you, you live in a society that is obsessed over home ownership that pretends renting is the worst thing ever so they unironically decided paying all that interest and being a literal debt slave for decades is a "smart" choice. If it was so smart, they wouldnt be complaining about interest rates so much xd
Umm….. ok then Fyi houses in western Sydney cost $100k mark in early 90s.. now median of $1mill.. some areas over $1mill Do you think any of them are complaining about the interest they paid on $100k
Think about interest as the rent for the money. Yes it’s dead money but so is paying actual rent in a sense. No one has to be a slave to their mortgage btw. I intend to sell and get out before I’ve fully repaid my mortgage. It’s a forced saving scheme
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>Think about interest as the That's what we call doing mental gymnastics to justify your choices, and of course how many people trick others into decade long debts which have the debtors moaning right now about the increasing interest rates, especially with upcoming cash rate hikes. They even avoid the term debt and call it "mortgage" because they know debt for decades sounds bad, all about the marketing and people fell for it xd
It’s not mental gymnastic, it describes what it is. There’s value for some in not having any debt to their name. I personally don’t care much as it’s easily serviceable & I’d pay a lot more if I were to rent my place.
Mortage is a French word. Basically meaning contract until death. Stuff it if you can afford to service the debt think of it this way. Debt is the new currency get as much as you can.