Renting is "throwing money away"? Buyng is "throwing money away" too.?

Question

I just bought my first home in Los angeles and realized that buying is throwing money as well when I considered interest payment, maintenance fees, high property-taxes, and insurance.

Actually I am throwing away more money now than when I was renting a small 2 bed 1 bath apartment.

Answer 1

Okay - if you want to look at it that way, it is your life. But 10 years from now when you sell the house and make a huge profit, make sure to let us all know how much money you made.

Smile, and relax. You will make the payments. You will enjoy your home.

Yes, you are paying interest. The part of your payment that is NOT interest is paying-off the house. The amount you pay each month for interest declines over time.

Yes, you are paying maintenance fees. I'm not sure what your are maintaining, but my guess is that it improves the value of your home and your life.

Yes, you are paying property tax. Property tax builds roads and schools. You were paying property taxes when you rented, too. You see, your landlord was paying the property tax, and jacking-up your rent because of it.

Yes, you are paying insurance. Now, you are INSURED. If something bad happens, you are covered. A couple of years ago, I got a new $10,000 roof courtesy of State Farm and Hurricane Ivan.

Remember, your only mortgage increase will be for insurance and taxes. Other than that, your house payment will be the same. So - in 5 years when your renting buddies are whining because their rent has doubled, you can invite them over for a dip in your new pool, or take them for a ride in your new car.

Cheer up!

Answer 2

You are correct. You have to pay to have a dwelling, no such thing as a free roof. Unless of course you stay in a shelter or freeload from parents.

The question of course is: how much roof do you need and at what cost.

If you compare apples to apples, say Renting a 3 bedroom house in the same location with the same sq feet. Then I would say, buying is better (if you buy for the right price and you plan to stay long term). Think of it this way: the landlord has to make $$ and pay the same fees you would pay for the same property.

On the other hand if you just moved from a 1 bedroom apartment into a 4 bedroom house then of course it's going to cost more. Even if you take appreciation, equity and tax right-offs.

So do apple to apple on what you purchased and what your neighbors with almost identical estate are renting their houses for. If the rent is equal or less of what your total monthly expense is then I would say: you should have kept renting.

Answer 3

The ADVANTAGES of buying a home:

The home may increase in value, resulting in a significant gain in net worth. Homeowners tend to have better credit ratings. The longer you live in a home, the more equity you build that can be leveraged using an emergency loan.
Mortgage payments contribute to an investment, particularly if the property is located where it increases in value over a period of years. If you have a fixed loan, your payment will remain relatively constant for the life of the loan. (Rent goes up) The interest paid on your loan and taxes are legitimate income tax deductions.
Ownership may contribute to security, especially in retirement years when income normally decreases.
A homeowner can borrow against his/her equity, as the value of the home increases.
As a homeowner you have the freedom to make improvements and changes to the home and surroundings as desired (although a development or association may have restrictions and prohibitions).

The DISADVANTAGES of owning a home:

A substantial down payment is needed.
Owning a home requires a substantial commitment in time, emotion, and money.
Homes may decrease in value if the neighborhood deteriorates, changes quickly, or the real estate market suffers a decline.
Due to the initial expense of buying a home, financial resources may be limited or reduced for other purchases or activities.
Maintenance and repairs are inevitable and could be costly.
Part of home ownership includes procuring enough income to afford insurance of all kinds including loss of the house as a result of a natural disaster.
Budgeting is cumbersome and a must in preparation for maintenance, repairs, home improvements, and/or home ownership/association dues.
Depending on where you live, property taxes could increase dramatically.
The cost of buying a home should also include the cost of moving into it and furnishing it.
Unexpected loss of income due to job termination or unemployment may limit money available for home ownership costs.

Answer 4

You may feel that way but doesn't it feel good that you have control over where your money goes and after you finish paying off your mortgage the property is yours. You can't say the same for your rental. Most if not all of your money that you are "throwing away" on taxes, interest, etc. can be claimed on your taxes so your property is essentially working for you.

Answer 5

Well the out of pocket monthly cost may be more, but the idea is that over time, you pay down your mortgage, and equity increases. Then in 15-30 years your home is paid off, and you have something you own with value. If you pay rent you will never get to that position.
Hope this helps.

Answer 6

Buying an apartment is throwing less money away if you want to live there for a long time.Renting is throwing less money away if you want to live there for several years.

Answer 7

ownership in the future is an equity whereas rent can never ever give you that. sure, you have to accumulate it over time but it is all yours too! you can sell it in a few years and have sometning more than rental receipts.

Answer 8

the difference is when you want to move now you can sell your house and get some of the money that you have paid in back and at least it is going to something that is yours and not just going in to someone else's pocket

Answer 9

If you feel that way, move back to a rental.