Home purchasing vs renting.
Given the current housing markets it is becoming increasingly popular for people to choose renting intentionally over buying. And I think that this is a profoundly mislead idea.
Renting can be cheaper than buying and it does provide flexibility. But that is generally just talking about monthly expenses. And that misses the mark I think.
While calling a house an investment can be a controversial subject, the fact is, it is not an entirely false claim, or at least, it misses the point. While you cannot guarantee that a house will always increase in value, you can be almost assured that it will retain at least some value.
This is already a clear cut difference. Every single cent spent on rent is completely gone.
But don't go into home ownership to make a ton of money either. It takes time to build equity, and even in a good market it takes time for homes to appreciate. And of course, some times the value drops.
The other categorical difference is that when you pay rent you are paying to live in a space. It is an endless cycle. When you pay a mortgage it feels the same, though it isn't. A mortgage payment is paying to eventually own the property. You simply get the right to live there as well. And, once the mortgage is paid off, the expenses will drop considerably. You will still have maintenance, utilities and taxes. But a huge portion of your monthly expenditure will now be gone.
These 2 points are incredibly relevant for 2 different reasons; changes in life circumstances and retirement.
While not being tied to a mortgage can be nice, many rental contracts lock you in for a year or more. Thus, not actually affording the much vaunted "freedom". Mortgages freedom is negotiable, and shorter terms are actually the cheaper ones. One top of which, if you need to move, owning a home has additional perks. Firstly, any contracts are basically moot if you're planning to take on a new mortgage. So, I can really move any time I want. And secondly, I may be able to down size or sell at a profit to unlock money for whatever triggered my need for a life change.
And retirement is the biggest one. I would say that, unfortunately, the economy and our culture has adapted to humans retiring. Which is to say that retirement is only affordable if you can either save up a ton of money, or you can shed a ton of expenses around retirement time.
Now, I did mention saving up for retirement as a possibility for renters. But, that just means you're hiding the true cost of renting. Since you can't JUST rent and wind up financial secure in old age, you MUST pay rent AND MORE into retirement savings than a person who is paying a mortgage.
On top of that, how much you need to save is more of an unknown when renting. Rent rises all the time. A mortgage only fluctuates with interest rates. And costs become even more stable when your own concern is increases in property taxes and utilities.
There are more reasons than this. But, I think the above exposes how simply looking at direct costs or attempting to debunk home ownership as an investment are misleading.
Renting can be cheaper than buying and it does provide flexibility. But that is generally just talking about monthly expenses. And that misses the mark I think.
While calling a house an investment can be a controversial subject, the fact is, it is not an entirely false claim, or at least, it misses the point. While you cannot guarantee that a house will always increase in value, you can be almost assured that it will retain at least some value.
This is already a clear cut difference. Every single cent spent on rent is completely gone.
But don't go into home ownership to make a ton of money either. It takes time to build equity, and even in a good market it takes time for homes to appreciate. And of course, some times the value drops.
The other categorical difference is that when you pay rent you are paying to live in a space. It is an endless cycle. When you pay a mortgage it feels the same, though it isn't. A mortgage payment is paying to eventually own the property. You simply get the right to live there as well. And, once the mortgage is paid off, the expenses will drop considerably. You will still have maintenance, utilities and taxes. But a huge portion of your monthly expenditure will now be gone.
These 2 points are incredibly relevant for 2 different reasons; changes in life circumstances and retirement.
While not being tied to a mortgage can be nice, many rental contracts lock you in for a year or more. Thus, not actually affording the much vaunted "freedom". Mortgages freedom is negotiable, and shorter terms are actually the cheaper ones. One top of which, if you need to move, owning a home has additional perks. Firstly, any contracts are basically moot if you're planning to take on a new mortgage. So, I can really move any time I want. And secondly, I may be able to down size or sell at a profit to unlock money for whatever triggered my need for a life change.
And retirement is the biggest one. I would say that, unfortunately, the economy and our culture has adapted to humans retiring. Which is to say that retirement is only affordable if you can either save up a ton of money, or you can shed a ton of expenses around retirement time.
Now, I did mention saving up for retirement as a possibility for renters. But, that just means you're hiding the true cost of renting. Since you can't JUST rent and wind up financial secure in old age, you MUST pay rent AND MORE into retirement savings than a person who is paying a mortgage.
On top of that, how much you need to save is more of an unknown when renting. Rent rises all the time. A mortgage only fluctuates with interest rates. And costs become even more stable when your own concern is increases in property taxes and utilities.
There are more reasons than this. But, I think the above exposes how simply looking at direct costs or attempting to debunk home ownership as an investment are misleading.
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