• seth@lemmy.world
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    18 hours ago

    Where is the money that is stuck in the house, that would hypothetically be able to be invested if not spent on the house? You have to pay to live somewhere, and if you’re paying less to purchase than rent, that is money saved which is available to invest. Do you mean the up-front downpayment money needed to acquire a mortgage in the first place (typically 10-20% of the purchase cost), that could be invested in the market instead for a higher return than slowly building equity through principal payments?

    • bitflag@lemmy.world
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      4 hours ago

      Let me give you an overly simplified example. You are in a property market where rental yield is 3% (happens in some cities)

      You could put a million dollar into buying a house and save $30k in rent every year

      or

      You could rent a million dollar house for $30k, and invest your million dollar in the market at 7%, returning $70k per year

      Obviously this gets more complicated with mortgages, taxes, maintenance, interest rates, etc. but the gist of it is that owning your home always comes with an opportunity cost, every dollar of house equity is a dollar that isn’t invested somewhere else. Depending on circumstances, renting might be the most economical choice.