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Samsquanch 2 years, 8 months ago.
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Stumbled upon an article that gives a good long term comparison of renting vs buying, figure I’d share it since the rent vs buy thing seems to come up on here often. Basically long term renting leads to more money being spent to keep a roof over your head and never building equity.
https://www.fool.com/mortgages/2017/05/21/is-it-cheaper-to-buy-or-rent-your-home-heres-the-r.aspx
Anonymous43I can’t own…my life isn’t stable yet.
I look at houses the same way as I look at expensive luxury cars or beautiful women, I can’t have that, yet.
Buying also means you owe the bank big time. Even if you have an offset account, you still pay a lot of interest. Its ridiculous that a shoe-box apartment now costs a bomb. Here in Australia, a studio apartment in the outer suburbs, 40Km out of Sydney city, costs $460K. A home is a place that people NEED. A place for someone to reside in and pay it off relatively quickly. When it comes to renting, the landlord can increase the rent and kick you out. If you cannot keep up with the rent, you are kicked out.
A tranquil mind is neither happy nor sad, it is uninfluenced by external conditions.
I’m in a position to buy. In fact I have enough saved for a 50% deposit on a modest 1 bedroom flat in my home town. But, I massively resent paying the banks interest. I hate the system and what it’s designed to do: screw as much money out of the slave classes…. I mean, working classes, as possible.
Then there’s the responsibility for maintenance, utility bills, council tax, etc etc. I prefer renting small rooms in other people’s houses with bills all included in the rent – I’ve always lived that way and saved a s~~~ load of money as a consequence. When I have enough saved to buy outright, I will. I should be there in about 10-15 years.
I’ve always viewed getting a mortgage in the same depressing light as getting married, or having children. Last year I considered buying, and I noticed within a few weeks of window shopping I was drinking more and feeling very depressed. I realised it was because getting mortgaged wasn’t for me.
Also, for freedom’s sake, I love being in a position where I can tell a boss to shove his job up his f~~~ing arse. It’s harder and scarier to do that when you’ve a mortgage and bills to pay.
Good article! I prefer to rent, for a number of reasons, the first of which is mobility. It’s very easy to pack up and leave with very little cost any time I want. Furthermore, with governments all over the world seizing private property with no justification, and with the U.S. government looking more communist by the day (temporarily stalled by Trump, perhaps), I’d rather play the safe route and not risk losing everything because some migrants from Syria need a place to stay. If the government seizes my apartment, the landlord loses, not me.
Women are better at multitasking? Fucking up several things at once is not multitasking.
Fine. But there is a critical flaw in this little statement alone.
Don’t forget about equity. No mathematical comparison between buying and renting would be complete without taking into account the fact that homeowners build equity while renters do not.
Renters do not? No. They are ASSUMING they do not.
Lets say you rent. don’t have a $2500 mortgage payment but your rent is $1250. So if you can afford the $2500 anyway, you sock away the other $1250 every month.
… and you also don’t have 1.25% property taxes to pay. On a $300K home, that’s +$400 a month out the window whether you own the home or not.
Their debate only works …. ASSUMING the renter doesn’t save anything.
The home is only a type of forced “savings”.
Let’s say for example that you buy a home for $200,000 and put 20% down, which would translate to a $764 monthly mortgage payment at the current 30-year mortgage interest rate of about 4%. At first, only about 31% of your mortgage payment will be used to reduce the principal, with the rest going toward interest. After the first year, you’ll have paid down approximately $2,800 of the loan’s balance.
Keep in mind, however, that this is $2,800 of equity a renter would not have built.
There it is again. ASSUMING the renter doesn’t save anything.
Such bulls~~~.The renter isn’t paying property taxes. A renter can beat that $2800 – easily – based on their savings of property taxes alone.
EQUITY IS EQUITY.
The majority of Americans don’t even maximize their IRA contributions. Maximize your tax free IRA contributions and sock the difference between your rent and a mortgage you would have paid away + property taxes + what you didn’t have to spend on a lawn mower… and over 30 years, see what you have. Put it down on paper!
They also didn’t need to buy 3 or 5 cars over 30 years to spend 10 hours a week in traffic just to face the back of a cubicle . . . just to “save” $XX K on a house in the ‘burbs. That’s foolish.
There is a very solid argument to be made for renting.
If building equity is the goal, all you need is self discipline.And don’t forget, that $20K down payment, cupcake wants you to waste that on a stupid ring for her selfish little hand. That’s when they never seem to want to talk about “savings”.
Lets not even talk about the anchor and weight of a 30 year mortgage around your neck. A renter can more easily up and move closer to a new job that pays better. Renters have more mobility – and opportunity cost is a major factor.
If you keep doing what you've always done... you're gonna keep getting what you always got.Building equity? That assumes that houses only go up in value. I lost $125k in “equity” in my house when my ex decided she wanted to get a divorce in the middle of the economic downturn. We ended up selling for less than we paid, got out for just about what we owed.
Stock can be sold in a second. Houses take a few months in a good market. And there isn’t a 6% fee when you sell.
Order the good wine
Lets say you rent. don’t have a $2500 mortgage payment but your rent is $1250. So if you can afford the $2500 anyway, you sock away the other $1250 every month.
But now your comparing the mortgage on probably a 300k house with very little down to the rent(around here anyhow) on a decent 2 bedroom apartment.
Yeah I agree downsizing will save you money, but the point is if you were going to rent a house for 2500 a month when you could buy one for 2500 a month you are throwing money away long term.
… and you also don’t have 1.25% property taxes to pay. On a $300K home, that’s +$400 a month out the window whether you own the home or not.
Nonsense. Property taxes are paid on all properties, not just owner occupied properties. The property taxes just get factored into rent.
Their debate only works …. ASSUMING the renter doesn’t save anything.
Nah…it works assuming you actually compare similar properties. I bought a 1 bedroom condo 11 years ago(s~~~ty timing bought at the peak) now and it costs me about 610 a month to live here(mortgage/taxes/condo fees). I could rent it out for 850 a month easily. In a few more years when I’m done with the mortgage(which is less than 3% or I’d have killed it already) its going to cost about 400 a month(assuming taxes/condo fees continue to increase about the same as they have over the last decade) where as rent will be over 900.
This is what the article is talking about…had I rented the whole time I’d have zero equity right now and higher monthly costs. I bought when I moved in because my mortgage/condo fees/taxes combined were about equal to rent and during that time my expenses have been relatively flat(refi when rates were low offset increases in condo fees/taxes) yet rent has increase about 250 a month. I’m left with a lower payment and equity. I’m winning by a large margin after just 11 years…the longer the comparison gets carried out the more things tip in favor of owning. Even if I have to go buy an 800 dollar fridge tomorrow or something because mine dies…big deal…I’m saving a little over 200 a month + about 180 a month of what I do pay goes straight to principal and builds more equity so really I’m “saving” almost 400 a month compared if to 11 years ago I decided to be a life long renter.
The home is only a type of forced “savings”.
I’ve never looked at it like forced “savings.” I looked at it as an investment where the dividends will come in the form of cheaper “rent.” I’ve never really paid more to own any single year than renting would have cost me…only 15 years later when its paid off I’ll have a place to live that cost me less than half of what renting would on a month to month comparison. Yes I’ll have equity, but to be honest its just going to sit where it is. Maybe I’ll have 80k worth of equity, but I’ll save 500 a month compared to renting at that point. A 6000 dollar a year savings on 80k “invested” is like a guaranteed 7.5% yearly return + whatever the property value appreciates.
There it is again. ASSUMING the renter doesn’t save anything.
Such bulls~~~.The renter isn’t paying property taxes. A renter can beat that $2800 – easily – based on their savings of property taxes alone.
And again with nonsense comparisons. Just for the sake of resonating with guys on this site, since I suspect a lot of us are single dudes who just need a 1 bedroom or a studio…what are you paying for rent right now? Let’s just say 850 a month for a 1 bedroom. What would it cost to buy? 100k? Well 100k a year for a 30 year mortgage at 4% with (I’ll go with 1.25% since you through it out there) in property taxes comes to a grand total of 582 a month. Let’s just say its a condo with 250 a month condo fees…it puts you at 832 a month.
In other words you’d be paying roughly the same as renting, you’d have interest and taxes to write off, and you’d be building equity. I know some people are probably thinking about extra maintenance costs…but in the 11 years I’ve had my place I think I spent about 2500 bucks one year to replace an HVAC unit, and about 1500 on some new flooring I put in and having some carpeting installed. Spread that 4k out over 11 years and its a whopping 30 bucks a month…not nearly enough to make me think renting would have been better.
Now I’m just going to add in to get those numbers…I even gave a high estimate on property values. I realize real estate is local, but around here, buying something you can rent out for 850 a month is going to run you about 60k, although taxes are a bit higher. I just assumed a 2.5% tax rate on 60k borrowed, and for a 30 year payment @4% you’d be paying 412 a month. If you could afford to throw in 10k as a down payment it would drop your payment down to 364 a month. Again we’ll assume its a condo with 250 a month condo fees…so you’d be looking at 662 a month…you’d be saving money right out of the gate PLUS building equity when you actually compare similar properties. If you hate the idea of paying on it for 30 years you could just throw an extra couple hundred a month at it to put you even with where you’d be if you rented and pay it off super early…plus if cash is tight for a while you still have the flexibility to just pay the minimum til you get caught up.
I’d encourage more guys who think renting is saving them money to research what buying something similar to what they rent costs and google “mortgage calculator” and play around. The above example…60k condo with 10k down, over 30 years you’d pay 85k to the bank before its paid off if you paid only the minimum each month, but the thing is if you rented for that same amount of time you’d pay more than that to your landlord regardless…so is paying tax deductible interest and taxes really worse than the more expensive alternative?
The majority of Americans don’t even maximize their IRA contributions. Maximize your tax free IRA contributions and sock the difference between your rent and a mortgage you would have paid away + property taxes + what you didn’t have to spend on a lawn mower… and over 30 years, see what you have. Put it down on paper!
They also didn’t need to buy 3 or 5 cars over 30 years to spend 10 hours a week in traffic just to face the back of a cubicle . . . just to “save” $XX K on a house in the ‘burbs. That’s foolish. /quote]
Again…you don’t have to buy a house to avoid paying rent. Once you get the idea out of your head that going from renting to buying means going from small apartment to big house, you’ll understand how much owning will save you.
The entire point is what would a life time of owning a house in the burbs cost you vs what would a life time of renting a house in the burbs cost you if the standard of living you want is a house in the burbs, and like the article points out owning crushes renting when you look at it long term. Yes…I’d agree there are cheaper alternatives than owning a house in the burbs…but if you want to look at those then the comparison for owning vs renting becomes maybe what does owning a double wide cost compared to renting one long term.
[quote quote=489216]Lets not even talk about the anchor and weight of a 30 year mortgage around your neck.
This is probably going to sound crazy…but who cares? What happens to the average guy who loses his job, can’t find another one, and can’t pay their mortgage…they run up all their credit cards trying to stay afloat and eventually lose their place, their car, they fall behind on student loans, and their credit gets trashed? So what if you were in the exact same situation only renting? You still end up losing your place and you still end up with s~~~ credit due to credit cards/car payments/student loan payments you can’t pay, so what’s the difference?
If I got laid off tomorrow and couldn’t find a decent job in the area and had doubts about being able to sell my place…you know what I’d do? I’d go to the bank, take a home equity loan for every dime they’d give me, stop paying my mortgage and never pay a dime on the home equity loan, and live here for free for 6 months until they boot me(or until I had another job lined up to move to) and let it be the banks problem, not mine.
Plus you always have to option to pay it off in less than 30 years. I know for me I could have paid mine off in 10 if my rate wasn’t so low that I decided not to pay it off. 10 years of a mortgage and then a dirt cheap place to live after its paid off is a hell of a lot nicer than a life time of ever increasing rent hanging over your head.
A renter can more easily up and move closer to a new job that pays better. Renters have more mobility – and opportunity cost is a major factor.
I think this is about the only thing I’d agree with lol. If you are only going to be somewhere a few years then yeah…owning doesn’t make much sense simply because whatever you could hope to build in equity and gain in appreciation is going to get eaten up by lawyers, banks, and real estate agents during the buying/selling/mortgaging process.
I prefer renting small rooms in other people’s houses with bills all included in the rent – I’ve always lived that way and saved a s~~~ load of money as a consequence.
Not a bad move. Downsizing and being a minimalist can save you a lot over a life time.
When I have enough saved to buy outright, I will.
But of course I also noticed you didn’t say you are going to save some money then rent indefinitely either lol.
Building equity? That assumes that houses only go up in value. I lost $125k in “equity” in my house when my ex decided she wanted to get a divorce in the middle of the economic downturn. We ended up selling for less than we paid, got out for just about what we owed.
Stock can be sold in a second. Houses take a few months in a good market. And there isn’t a 6% fee when you sell.
In theory…if you didn’t get divorced, and just stayed in your house…where would you be on it today? How much equity would you have built and how much has the property recovered? I bet you wouldn’t be underwater if you rode it out.
I know with the place I bought, it was “worth” 80k when I bought it. Roughly 2 years later in the midst of the downturn units here were moving for 40k. I just said f~~~ it and kept paying because even if I walked away rent was still going to cost me more month over month.
Fast forward to today, and even buying at probably literally the worst point in American history to buy real estate, its now “worth” about 60-70k and I’m sitting on 40k worth of equity…still much better off than had I rented from the start or much better off than had I walked away during the downturn. Yeah I’m not doing as well as if the value went from 80k up to 100k…but like I said…mathematically I’m still beating rent at this point and the gap will only grow over time. Ideally I’d have bought in the middle of the down turn, but high sight is always 20/20…its like looking at stock charts saying damn…I should have bought it then…
I always just looked at it like real estate is long term. Yeah you could lose short term if your flipping or getting divorce f~~~ed, but even during the crash if you sold a property you owned for 20+ years you’d have still walked away selling it for more than you paid…just not as much as had you sold a year or two earlier.
Tbh if you are single, and not materialistic, and willing to rough it, a RV/caravan/trailer is a cheaper option. But as with everything, it’s about location.
I lived in a shared house as a student, to pay my way through college/uni. Wouldn’t want to do it now.
Why people want to in-debt themselves so early I can never understand. In the UK, property taxes, local housing taxes and utility costs are so expensive that there is a significant running cost with owning your own home. Renting gives you flexibility, and makes you travel light, but has the hassle that you can end up saving less IF you don’t share. But buying permanent property fixes you in one place. The hassle of moving to another city and the costs AND looking after your other property can be more hassle. People are struggling with rents these days, and yields are down for landlords.
Overall the whole system in the UK of property ownership vs renting is a big problem. My view is save as much as you can, and build a prefab or buy a large caravan and live debt free !
D. G. I. Don't. Get. Involved. (Be happy, and stress not)
Everyone has good points here, what the article failed to mention though is cost savings and what to do with your money…
I have looked in buying a house versus renting and really in the end (if you do it right) renting is better. Let’s take a look at a 250k house in my area (Canada)… from the get go I would be able to get around 4% interest rate with 10% down.. tack on strata, mortgage insurance, house insurance, repairs, and property taxes and in the end after 25 years would end up spending around 500k. There is no way this house will be worth 500k and even if so I would only be breaking even. With renting I have one price for everything and never have to worry about repairs or taxes… However I will never have equity in my rental.
What really bothers me is how much you have to leverage to get a home these days, upwards of 90%… that is a huge amount. There is also no guarantee that your interest rate will stay the same when you renew your mortgage, it could go up meaning 10’s of thousands of dollars tacked onto your existing mortgage. Property however is always a safe investment when you have the cash to buy it outright so what I do is a hybrid approach in housing. I do rent a modest place that costs me 1000 a month all in and with all the savings I have I invest that money into REITS. These companies pay out monthly dividends to which I invest into more shares to which I get more money each month. So basically I am renting but owning companies that own properties at the same time. Eventually I will have enough income where I will not have to work anymore which will be amazing.
Properties are a great investment if you can buy it outright or at least with 70-100% down to negate paying extra fees and crazy interest. REITS allow you to own property without any of the hassle of owning property but the only downside is that you can not leveraged money to buy into them, what you put in is what you get out.
Knowledge is power..... Don't waste your brain on bullshit
Anonymous1I enjoy having a garage which is not feasible with renting. Plus growing my own food. And having a large dog.
The rental market by me is close to what I pay for mortgage. And the maintenance I do all myself. Except roofing and concrete which I don’t need to worry about at the moment.
I have looked in buying a house versus renting and really in the end (if you do it right) renting is better. Let’s take a look at a 250k house in my area (Canada)… from the get go I would be able to get around 4% interest rate with 10% down.. tack on strata, mortgage insurance, house insurance, repairs, and property taxes and in the end after 25 years would end up spending around 500k. There is no way this house will be worth 500k and even if so I would only be breaking even. With renting I have one price for everything and never have to worry about repairs or taxes… However I will never have equity in my rental.
You are only looking at half of it though…let’s just say after 25 years of living in a house you paid 500k for all expenses combined from purchase cost to taxes to maintenance and insurance. That would work out to a cost of 1666 a month. I’m not familiar with rental prices in Canada but what do you think it would cost you to rent out a 250k house right now? I don’t know how different the Canadian market is but I know around here a 3 bedroom house in a decent neighborhood valued around 250k would run you about 2k a month in rent. What do you think rent will cost you 25 years from now? You are going to end up spitting out way more than 500k on rent over a 25 year period just to end up with zero equity.
Now for property value, let’s just say real estate appreciates slower than inflation over the next 25 years and its value goes up 1% a year…that would leave you with a 250k house worth 320k. So now look at that 500k-320k…you are really only out 180k, or the equivalent of 600 bucks a month after you factor in you built equity over time and your mortgage payments don’t just evaporate into nothing(well evaporate into your landlords wallet) like rent does. Sure you aren’t going to make money so to say…like your 250k house probably won’t be worth 3 million and let you sell and walk away with a fully funded retirement…but you’ll lose a hell of a lot less than renting.
Other things to consider…again I’m not too familiar with Canada, but here we can get fixed rate mortgages. I can lock in my term and interest rate at the start of the mortgage and the bank can’t just raise the rate on me. Also we can write off taxes, mortgage interest, and in some cases various home improvements, like in the past tax credits have been offered to by high efficiency appliances and stuff. So maybe after write offs you knock 2-3k a year off your tax bill…2-3k a year for 25 years put 50-75k back in your pocket. Ideally of course you’d just live somewhere small and not pay the mortgage interest or higher taxes…but again if you want the standard of living of being in a 250k house…this puts buying further ahead of renting.
And finally the most important thing of all. unless you plan on kicking the bucket before your property was paid off, in year 26 when that bitch is finally paid off…how much will it cost you to live in your paid off house vs what would rent look like by then? You’d probably be looking at about 1/4 to 1/3 of what rent costs. Plus you have the option to sell, downsize, and have a pile of cash to maybe buy a smaller/cheaper place and help pad your retirement at that point where as if the renter wants to downsize they walk away with nothing to show for a lifetime of paying rent.
Properties are a great investment if you can buy it outright or at least with 70-100% down to negate paying extra fees and crazy interest.
Its actually the opposite right now due to the low interest rates. I’m paying 2.79% on my mortgage. I could pay it off more than 10x over but I’ve got money in stocks paying me 3-5% dividends(plus hopefully share appreciation continues) so why would I want to pay it off?
Again I don’t know how Canada works but here they make you have what they call PMI(primary mortgage insurance) if you have less than 20% equity. I don’t know if its still common for people to do, but I know for a while if people were buying a place and didn’t have 20% to put down, they’d often take a second loan to cover the 20% so they didn’t have to pay PMI. Even if you just pay the PMI though it’d only end up being about 250 a month on a 250k loan until you had 20% equity…which considering the numbers when renting vs owning if you really wanted to live in that 250k house long term owning saves you more than 250 a month compared to renting so even if you just say screw it and pay it its still not that terrible of a move. Of course you could also just put the 20% down and not worry about it, but I realize this is hard for some people to do, which is really unfortunate because it leaves them trapped paying rent longer.
REITS allow you to own property without any of the hassle of owning property but the only downside is that you can not leveraged money to buy into them, what you put in is what you get out.
Well that, and you can’t live in a REIT. I wouldn’t want to own properties as a landlord just because I wouldn’t want to deal with the tenants when I could just dump money in stocks and sit back and collect dividends, but I’m glad I own my primary residence.
I think this article is incredibly relevant in this day and age in which housing is reaching levels we’ve never seen before. You’re average person under 26 cannot afford a bachelor pad, or a 1 bedroom on his own mens. Prices for apartments and houses are going up relentlessly and rent is also climbing to. Even in places that aren’t in big cities. Millennial’s are getting decimated.
SolidusX wrote:
REITS allow you to own property without any of the hassle of owning property but the only downside is that you can not leveraged money to buy into them, what you put in is what you get out.
Well that, and you can’t live in a REIT. I wouldn’t want to own properties as a landlord just because I wouldn’t want to deal with the tenants when I could just dump money in stocks and sit back and collect dividends, but I’m glad I own my primary residence.REIT = stock, they are found on the TSX as well as american exchanges and usually dish out between 4% and 12% dividends per month and are just like any other company on the exchanges.
Canada is also ridiculously expensive for housing right now and has been for quite a while, I would rather put my money in something that pays me now. When you do the math on that 250k house you lose essentially 200-250k in wasted money to fees, taxes and interest which does not make sense to me. I would rather build up a sizable portfolio now and when I have enough dividend income that equals a mortgage payment then consider buying outright or at least a large portion.
Knowledge is power..... Don't waste your brain on bullshit
The question of whether to rent or own is very simple. If you plan on being in your home for 5+ years and you can get your mortgage payment (which includes insurance and property taxes) to be about (or even slightly over) the same cost as your monthly rent payment, then jump on it.
Of course, there are pitfalls. Don’t buy a dump that needs tens of thousands of dollars worth of repairs unless you get it for a really good deal.
Basically if you’re not paying anything more than what you would be paying for rent, then you’ll automatically be building “free” equity that you can draw from later. The faster you pay it off, the better off you’ll be. But even if you spend the full 30 years to pay it off, you’ll have a fixed monthly payment. Can you imagine a landlord not jacking up your rent for 30 years? I certainly can’t.
In order for this to work, you need low interest rates (pretty much guaranteed in the US), and your mortgage payment needs to be the same as your current rent payment (give or take 10%). Even if the value of your home tanks from say $400,000 down to $200,000 you’re still good because in the end you didn’t pay anything more than you would have paid if you had rented and you now have a $200,000 home.
These are the scenarios where buying does NOT make sense:
1. High interest rates
2. You live in an area with super low rent (and I mean low – like you can rent for 1/2 the cost of buying)
3. You plan to move in the next few years
4. You are thinking of buying in an area where the value of the home might plummet 90% (think Detroit). Just avoid the ghetto s~~~ holes and you’ll be fine.
5. Your financial situation is unstable. If you default on your rent, you’re kicked out onto the street. If you default on your mortgage payment, your credit is ruined and you lose your down payment.
Anonymous1A lot of these cost comparisons depend on where you live and the local tax laws.
Mike mentions Australia above.
Well – in Oz, any capital gains on our primary place of residence (home, PPOR) is untaxed. If the markets keep going up as they have for the last 50 years (approx doubling in value every ten) — and this is a big IF, as our big city markets are very distorted by limited land release, bad transport and concentrated population centres — then owning often makes more sense.
Sure – you can invest the money you save by renting, but that *is* taxed. Leveraging your home by 90% and in this current low interest environment has been a boon over the last couple of decades for home owners, even if they only paid interest on their loans.
No land tax on PPOR, either (well, unless its megabucks).
Of course this could all turn to s~~~ like the US marker did a few years back, but there are a couple of differences, like not being able to walk away from your loan if its under water, which make it a bit more robust.
The biggest problem for the under 25s in the UK is that the majority could not even afford the deposit to get a mortgage to buy a house. Plus even if they managed that, job security is virtually non existent these days in most professions (that includes doctors, dentists, lawyer, engineers etc). Therefore it is not even if you can afford to buy it or you think you are going to be in an area for 5 years plus, most jobs don’t last more than 1-3 years. Salaries are pretty much frozen, so the only way to get a pay rise is to move jobs, which if it means leaving a city, selling up and buying again would incur lots of costs and taxes. Overall buying is not affordable or wise for most in today’s ‘flexible’ aka s**t job market.
But unless you want a family, why not consider alternatives. Most people (and that includes me) would consider buying something cheap in a cheap location (that is safe), and then rent a room on a flexible basis for the city where there is work. It’s tough, but it teaches you to live simply and not to have too many material things. Learn to cook. Learn to garden and grow vegetables, it’s very easy.
Don’t kill yourself taking on debt to slave away for nothing.
Most starting salaries are so low, it will be impossible to save anything, and I can’t see the UK offering those university students with 100K of debt any real way out.
D. G. I. Don't. Get. Involved. (Be happy, and stress not)
When you do the math on that 250k house you lose essentially 200-250k in wasted money to fees, taxes and interest which does not make sense to me.
Sure – you can invest the money you save by renting
I think you guys should actually try reading the article in which these things are addressed. It breaks this down for you…YOU DON’T SAVE MONEY BY RENTING. The author literally gives a comparison of buying a 200k property compared to renting something for 1000 a month. The end result…
This means that in year 30, you can expect your rent to be 2.4 times what you’re paying now. On our $1,000 original monthly rental budget, that means you can expect to pay about $2,400 per month for rent in 30 years. In all, you will have paid $612,000 for rent over 30 years, assuming 3% annualized rent increases, and you’ll have nothing to show for your money. Or, you could pay a total of $360,000 on a mortgage, and own your home free and clear, which will likely be worth significantly more than its original purchase price by that time.
So what are you concerned about, paying in this example paying 160k over the sticker price but in year 30 your mortgage is paid off, you have a super cheap place to live, and you probably have more equity in the house than the original 200k you paid for it. Total f~~~ing win.
The alternative if that extra 160k “evaporating” from your wallet is just too much to deal with is to instead pay and extra 412k rent over that 30 year period, still have a big rent payment even after a mortgage could have been paid off, and have zero equity?
I know personally I’m seeing this effect. I’m living in a place I bought 11 years ago that cost me about the same as renting year 1, and in year 11 I’m paying about 25% less per month than the person across the hall renting pretty much an identical unit and I have about 30-40k in equity built up. Where did the renter come out ahead? If I take the loan to term, I think about 4 years, my costs will be about 1/3 of what renting would be costing me to rent an identical unit and I’ll have somewhere in the ballpark of 60-80k in equity depending what property values do. If 11 years ago I believed someone who told me I could save money by renting I’d have literally f~~~ed myself out of a considerable amount of money.
I have owned, and now I currently rent.
For my peace of mind, I can sleep at night knowing that I don’t owe a bank at least $80,000. Twice that if the mortgage went the full 30 years. I’m really protective of my property and I do cause myself stress worrying about it. S~~~ is too expensive to own something and not take care of it. The home that I owned, the neighbors were all pieces of s~~~ and didn’t care about equity or home value.
Basically over the 5 years I lived there, I paid $50,000 just on the mortgage. The loan principle only decreased by about $9K, rest was interest/taxes/escrow. That doesn’t include about $140 in the utilities per month. It didn’t include all the mulch, paint, gas for lawnmower, fertilizer, cleaners, all the little expenses that come along with owning a home.
Selling the home, I netted about $47,000. With all the expenses included it probably cost me about $10,000 total to live for those 5 years in the home. It costs about $10,000 to live for one year in an apartment. But, I got lucky that the value of my home increased, and I purchased in a buyers market. Now that it’s a sellers market in the US, there’s no way in hell I’m paying asking price, or over asking price for another home.
I’ll own again, just never in a suburb. I’ll find some land, build a modest home, and live out the rest of my life outside the city.
So in my situation I lived for cheaper in my home. But the money wasn’t worth the stress of owning, not even close. Not even after putting that huge check in the bank.
In other words you’d be paying roughly the same as renting, you’d have interest and taxes to write off, and you’d be building equity. I know some people are probably thinking about extra maintenance costs…but in the 11 years I’ve had my place I think I spent about 2500 bucks one year to replace an HVAC unit, and about 1500 on some new flooring I put in and having some carpeting installed. Spread that 4k out over 11 years and its a whopping 30 bucks a month…not nearly enough to make me think renting would have been better.
Yes but you do not own the structure on the condo, so you only are liable for the walls in. Just on my 1400 sqft home, the roof was $10,000 to replace. Fortunately the insurance paid for it, but if I had to pay that out of pocket, I’d be f~~~ed. I understand where you are coming from, and it was cheaper for me to live in the home than my apartment. But one big loss or one big expense can f~~~ it all up.
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