“A guy I know bought a place and was bragging that his mortgage is only a little bit higher than his rent would be. He gave me the whole lecture about how I am throwing money on rent. It took only a month until he started complaining about other expenses.”

“A guy I know bought a place and was bragging that his mortgage is only a little bit higher than his rent would be in a similar place. He gave me the whole lecture about how I am throwing money on rent etc. It took only a month until he started complaining about the high condo fees (which he did not account for), taxes (which he did not account for), higher insurance cost (which he did not account for) and a possible “assessment” (not even in his dreams when he was doing his “calculations”).
He has a variable rate mortgage and is paying just over 2% interest, that’s how his mortgage payments came relatively close to rental cost. Every 0.5% increase would add another $200+ to his cost.
Most home “owners” I talk to ignore any variables beyond mortgage when they are doing their calculations.
Another cost that is almost never accounted for – closing costs.”

– a splice of two posts by ‘bubbly’ at VREAA 20 Dec 2011 11:55am and 11:58am

18 responses to ““A guy I know bought a place and was bragging that his mortgage is only a little bit higher than his rent would be. He gave me the whole lecture about how I am throwing money on rent. It took only a month until he started complaining about other expenses.”

  1. This I see a lot –poor cost accounting –,but this guy is an extreme case.

    Pro shops and managers are much more diligent.

  2. Renters Revenge

    I work with a guy (university educated) who thought a 1% increase in mortgage rates meant his mortgage payment would go up 1%. He acted cool when I explained it but I could tell he was freaking out inside. Seriously, there should be a finance course that is mandatory for anyone borrowing a sum of money that is equivalent to 4-5 times their annual income.

  3. 1995 was the last year that business ed. was taught in high school in BC. Perhaps math teachers should be explaining mortgage math when kids ask why they need to learn this stuff.

  4. Mind you, I have no faith in the ability of the general public to do basic math. I find that even cashiers today are unable to perform the addition and subtraction required to make up correct change if the cash register doesn’t do it for them.

    • There is an Arthur C. Clarke short story about Earth many centuries in the future, where machines have rendered the learning of math by humans completely unnecessary. One lowly worker discovers that, with crude symbols he invents, he can scratch out sums that replicate the calculations the machines are doing… when authorities get wind of this they are very disturbed.

      • Min in Mission

        Man, you are showing your age when you can remember that story. I read that years and years ago. Funny how the authorities liked the “power” they felt when the could do the basic math.

  5. it sounds like this guy “got had” by a salesman :P

  6. Nothing new, I have heard that several times from people. Even if you walk them THROUGH the math on paper they still look at you like you’re from another planet and talk gibberish.

  7. 4SlicesofCheese

    I have renter friends that complain about this, how they have so many bills to pay ( after finally having to leave the nest and out on their own ) so it is not just a owners issue. The issue is people do not budget or spend within their means anymore.

    That being said I my coworkers had to leave work yesterday only to find out that his fridge in his house that he just bought is dead.

    Happy Holidays Everyone!

  8. These pretzels are making me thirsty

    True story…

    An acquaintance of mine just bought in East Vancouver for close to a million dollars ($ 960 before the closing costs).
    95 year old.Vancouver special…and the house is butt UGLY and will likely need a lot of maintenance. I kid you not !!

    His reason..the value always goes up and renting is wasting money.

    He has a masters in computers and makes close to $ 60K per year (spouse also works around $ 50K per year)

    A 5 percent correction will wipe off $ 50K
    A 10 percent- $ 100K
    Common sense is not common anymore

    But hey..the prices always go up, …and its different here…and the Chinese will set us free..

    • I wonder how much loan their bank gave them. Can someone buy a home worth $960k with $110k a year income?

      • yes, with enough of a downpayment, it doesn’t matter what the cost of the home is, only what they are borrowing.

        More worrying perhaps…what is a person with a masters in compsci doing only making 60K per year? Do people with that level of education really work for that low a wage?

  9. “Every 0.5% increase would add another $200+ to his cost.”

    Well that’s something he doesn’t have to worry about for another ten years at least thanks to the ultra-low interest rate environment with no end in sight that is Canada. So, in a sense these people are right.

  10. Renters know all there needs to be known about mortgages and the owners know nothing. What are the odds?

    • Don’t see anybody making that argument here.
      What has been pointed out is that there are some folks with mortgages who underestimate (a) actual costs and (b) the effects of rising mortgage rates.

  11. “Renters know all there needs to be known about mortgages and the owners know nothing. What are the odds?”

    Well, if these were independent events, the odds would be quite low. My guess is that the events are correlated: the people who currently rent and read intelligent bubble blogs are probably the ones who can do the math.

  12. Merry Christmas vreaa and all you posters both good and evil (you know who you are). I love you guys.

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