Is it actually smarter to buy than rent?

Question

My husband and I currently rent, everyone says that it is silly to rent rather than buy but we keep thinking about it and I do not see how it is. The average house payment in our area is $750.00. Our rent is $400. Lets say that if we payed 750 for 30 years it will cost $270,000. In 30 years we will be 60 with our home paid off. As long as we do not remortgage like most people do. Now if we pay with respects that rent will rise. Lets say $650.00 for 30 years we will pay $234,000. Also, if you figure in 2,000 a year for house repairs if we buy. This comes to a total of $96,000 more to buy then rent in 30 years, which I understand that you would own it but if you were renting with that extra $96,000 that you save in 30 years you could rent for 13 more years. This would put my husband and I at 73 years old. All of this does not include property taxes and home insurance. After remortgaging 2 times my folks owed 100,000 on there home when they divorced after 30 years. Cheaper, how?

Answer 1

It's smarter to buy because eventually you'll be done paying and you'll own the house. If you rent you'll have to pay until you die and you'll never see that money again.

Answer 2

Most people think that it's smarter to buy because that $400 you pay each month is money you'll never see again.

On the other hand, when you make house payments, you're storing away your payments in the form of ownership in the house, and eventually the payments stop and you own the home.

You can raise your standard of living considerably by owning a home. Your home makes your life rent-free, the equity on your home can be borrowed against in emergency, and you have an actual estate to pass to your kids. Owning a home also cuts your retirement needs in half.

Here's how you kick it up a notch:

Buy a very inexpensive home that needs a lot of work, your payments could actually be less than $400/month. Do the work--drywalling, repairs, painting, etc. When you're finished, you'll own your home and it will be worth considerably more than you paid for it.

(In your calculations, you forgot to mention that rent goes up through the years but your house payment never does. You also forgot to add in the benefit of living for 20 years rent-free after you've paid it off.)

Answer 3

First of all you are way overboard on the 2000 dollars a year for house repairs.Second you fail to think about the equity you have when you own your own home.My wife and I have owned our own house now for 3 and a half years and our mortgage is 800 dollars a month(that includes taxes and insurance).My friend and his wife have rented a house for same amount of time at 750 dollars a month.They have spent $31,500 on rent in that time and have nothing to show for it.My wife and I have built up equity in that time.I can do whatever I want,whenever I want,to my property.I do not need to call someone and ask if I can have a pet or plant a tree.In those 3 and 1/2 years my wife and I have paid $33,600 in mortgage,taxes,and insurance and although it is more expensive than my friends rent I have built up equity and he has nothing.There is more responsibility with ownership but it is worth it in my opinion!!!

Answer 4

If you can rent the same house for cheaper then why not rent?
If you look just a few years back rent and mortgage payments were just about identical. But as you can see not anymore! Unless you can really take advantage of the minor tax advantages of owning a home (which i don't think you will have any because you guys may be collecting s.s and retirement pension right now. I don't see why you would want to purchase at the moment. Prices will continue to drop or remain the same over the next 2-3 years, In my opinion. Let the incomes of america catch up to the appreciation that we have experianced over the past few years. There will always be homes for sale. The real estate market is not going away anytime soon. What is the rush? Especially looking at your situation, you are thinking of financing 100%! what if property values do take a dip next year.... you'll be stuck! Don't put yourself in that situation. CASH IS KING at the moment.
Why did the owner of pimpco (biggest bond investment company) sell his 6.8 million dollar ocean front home in california and decided to rent? Because its cheaper to rent! And he is worth in excess of over 100 million dollars. Look it up and check it out for yourself. Pump your monthly savings that you have right now into your retirement account...

Yes you do have control over rental payments. If they raise the rent, find another place. There are thousands of homes/apartments/condo's for rent in your area i'm sure.
And don't listen to people and SPECULATION that your home price will DOUBLE in 10 years! That person better be within chocking distance when your in default. Look at the FACTS! Foreclosure rates in certain areas have inceased 50+% over the past 12 months depending on the county. That is a fact!

Answer 5

You can argue that you are saving money. But, if you didn't re-mortgage and spend within your means and made slightly higher payments, you would be building equity. So, lets assume after 25 years, you own a home valued at $200K and its paid off. You have built equity. Is it safe to assume that by renting, you'll actually put away and bank $200K in 25 years? Its doubtful. The more disposable income people have, the more they spend. They'll spend it on high end electronics, or buy a more expensive car, or travel more. You have to ask yourself...in 25 years, what will I have or what will I need to retire.

My house when paid off (18 years total to pay) will be worth about $250K...my equity, not someone elses. If I chose to sell when I retire, there's a bunch of money in my pocket...I'm working hard now to enjoy later in early retirement.

Answer 6

Buying is also an investment. You may spend $270k over the next 30 years, but your house will be worth MORE than that in 30 years.

I bought a house in 1998 for $82k (real estate is CHEAP in Houston). When I sold it in 2002, I got $113k for it. I made $31,000 (minus closing costs). Imagine what I would have made after 30 years instead of 4?

Homes appreciate, unlike cars and other purchases that depreciate.

Answer 7

each and every so often that's extra perfect to hire, each and every so often it rather is extra perfect to possess. All those people who're the different way up on the their mortgages and can't sell their probable and are procuring something this is properly worth 50% of what they offered it for = wager they desire they have been renters. yet to boot that there are nonetheless execs and cons: are you youthful, do you no longer comprehend the place you would be in 5 years, do you like having the flexibility to call a landlord to mow the backyard or maybe exchange the lightbulb = there is no longer something incorrect with renting. do you desire to be able to restoration the homestead the type you like? do you comprehend you're fairly good? = how plenty do properties fee on your section = it could make experience to purchase.

Answer 8

thank you for a detailed intelligent question.
are you happy renting? are your palnning on moving out of area? do like not having the upkeep hassles of a house? yes ? rent!
no? consider buying what you can afford - not what the banks tell you can. there is a real difference. in your case renting may be a better deal, just invest the difference then you can rent around the world later.
the tax write off mentioned is not quailfied to 80% of those with mortgages.
decide what you want to do with you life.
house owner ship isn't about the numbers.

Answer 9

Renting does not lead to any equity. There are also signifigant beneficial tax consequences to home ownership as the mortgage payments are deductable. Additionally there is a signifigant benefit to having a roof over your head paid for when you retire.

Answer 10

You like to rent so you are painting a picture for renters. Now let's look at the other side.

1. You have control when you get a 30 year fixed rate mortgage.
You know what your payment will be for 30 years, and if the rates go lower then you can remortgage your home to lower your monthly payment.

You have no control over your rental price. NONE!

2. You have control of how you live within your inside of your home. You have your own keys. No one can come into your home if you don't want them there.

You have no control when you rent, as any landlord has the right to inspect if there's any damage to other apartments and come into your place (after knocking on the door) when they want, and perhaps may try to say when they're coming. You have no right to say no. Landlords have the right to inspect at least once a year with little or no notice. They also have a right to inspect their hot water heaters, and appliances at any times, without you there.
If your jewelry, or money is missing, good luck trying to pin it on them for theft. If they don't trust you, then can do something to make your life uncomfortable.

3. Your home is yours. You may paint it inside and outside. You may fix anything inside or outside as you choose. You may add new carpeting, or even a new kitchen or bathroom, or an additional bathroom - all at your whim. Improvements increase the value of your home.
You may even add a fireplace and a jacuzzi, or hot tub.

You may not alter the apartment at all.

4. You may like the home for 10 years and think about moving, and at the end of 10 years, your home doubled in value. So a $100,000 home in 1997, is now worth $200,000 today.
You may decide to move, and there you have the $200,000 market value home less the mortgage that is left, which is about $70,000, so you have $130,000 to put into your pocket if you sell.

You have nothing to put into your pocket if you move from a rental.
So that's $130,000 vs. $0 = is that hard to see?

5. Your mortgage interest (which is most of your payment in the first 15 years) is deductible from your income taxes, along with your real estate taxes.
None of your rent is deductible from your income taxes.

6. At the end of 30 years, you own a home free and clear of any mortgage unless you decide to pay it off sooner.

At the end of 30 years, and your home is now worth $350,000 you may sell it and pocket the $350,000 or move to Florida and buy a small home for $100,000 and now you have $250,000 in savings to live as well as you wish.

With a rental at the end of 30 years, your rental is worth nothing.
You can't sell anything, and you have nothing but pieces of paper known as receipts to look at.

7. If you want a car, summer vacation home, college tuition, or other travel interests and you have a home, you can get a home equity loan at a low interest rate, and borrow against your home.

Rentals - you can't borrow against anything!

8. YOUR RENTAL PROPERTY CAN BE SOLD AT ANY TIME ANY PLACE, ANY HOW - AT THE whim of the landlord.

9. After sales, many rentals are "improved" and then the rents go up very high. You have no control over the sale or increased rents.

10. Pride in ownership. That's hard to quantify, but it definitely exists in America.

I could go on and on as I believe many start with a small home, and then trade up within 15 years, and then have much to add to their assets as they look forward to retirement.

GOD bless us one and all, always.
MBA-Boston Univ.
CPA-retired

I sold real estate working my way through college. Most of the time, the renters turned homebuyers had lower monthly payments compared to rental payments after they bought their home. They even sent me Christmas and Holiday cards thanking me for helping them to get their first home.