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An Alternative View of Your Mortgage

When I look at my assets these days — and it’s a quick look, trust me, I think I can look directly at the sun longer — I don’t even consider the value of my home.

Why not? Because I don’t even see it as part of my investment mix. Sure, when I sell, I hope I see a gain. But when I bought the home a couple years ago (yep, I nailed the top of the market, please keep your comments to yourself….) I looked at it as a pure financial decision: over the course of 10 years, even if we lost money on the house, would we pay more in rent, or pay more for the mortgage [1]?

Unless I’m forced to load up the jalopy and head out West ‘Grapes of Wrath’ style, I think the answer is that I’d pay more in rent.

The thing is, I’m just not good at timing the market. Even with stocks, I buy high, sell low. That’s why I put my investing on auto-pilot and make regular investments, and do the same with selling positions that run a little hot.

I try to have the same clear-eyed view when considering housing. I knew the market was overheated and likely to come down, but I didn’t know when. And with a new Johnson on the way, I knew I needed more space. Going from a one-bedroom to a two-bedroom in New York is shockingly expensive, and doing the math, buying instead of renting made more sense (as did moving to the suburbs from the City).

So when I hear the debate about whether now’s a good time to buy a house, I think the same thing:

If you can afford it, preferrably keeping real estate [2] costs to less than 30% of your take-home pay (yes, take-home).

and

If you would pay less on housing costs over 10 years than you would pay in rent,

Then buying a home might be for you.