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This question; Is it cheaper to rent or buy your home, has been around for a long time. There is no set answer that works for everybody. In some situations there is no advantage with either way.
If you move often then always rent your home whether it is an apartment, a house, or a condominium. Buying houses costs plenty of money up front. If you finance it you will be paying fees and interest to the bank. You will be paying for appraisal fees, closing fees, taxes, surveys, and who knows how many others get tacked on to the purchase.
Renting a home avoids the huge up front costs. Sometimes the monthly payment is more. So what. You still have all of your cash invested in other things instead of gone.
To me the best part of renting is I don’t need to go through the sales process if I want to move. I just wait until my lease is up, tell the landlord thirty days in advance of the end of the lease that I won’t be renewing it, and then I just move. There is no need to hire a real estate company to show the property and negotiate a sales price. There is no hoping that the buyer has good enough credit and gets their loan approved. There is no hoping that the buyers house sells because the sale of my property is contingent on their house selling. THERE IS NO WAITING AROUND for anything, I just pick up and move.
Before the housing bubble burst in 2008 I saw a news story about this topic. It compared the financial benefits of renting to owning over the last forty years. It showed average rents and average mortgage payments throughout that time. It also took into account the interest on money that renters would get from the money they didn’t need to contribute as a down payment for a property. Overall there were no financial benefits to owning a home.
There are intrinsic benefits to owning a home. There is a bit of extra pride that goes with owning something substantial. Nobody can tell you to move on a whim. You can be louder in your own home than in an apartment. There are no restrictions on owning pets. You can put up decorations for different seasons on the exterior using nails or screws if you prefer them. You get the idea.
I was made to move out of a house I was renting because the owner wanted to put his daughter in it. Renting from a corporation with a management company has its advantages over renting from an owner.
Owning a house or condominium also comes with legal responsibilities. You are responsible for anything that happens on the property and you must keep it looking good and do all of the maintenance work.
Mortgages on property create debt for you. If you don’t pay your debt you will damage your credit rating. Personally, I don’t really care about that. In my case, as a debt free person, I have a really low credit rating because I haven’t used credit in years. Debt creates an obligation between you and your bank. That is a long term problem (unless you get my book “How to Be Debt Free Fast! at www.MrMoneyHelper.com.)
Now that many homes have lower values than their mortgages state they are worth, people will be paying on mortgages that are really the equivalent of paying rent. For perhaps the next decade home owners paying on older mortgages will not be building any equity. I’ve been paying attention to the housing market for years. That is why when I moved out of my house five years ago I decided to not buy another house.
It is my opinion that it is still too early to buy a house if you intend to keep it. If you can flip a foreclosed house then it is an OK time to buy property. Many people disagree with me. They think it is a great time to buy. If the economy doesn’t get any worse then they are right and I’m wrong. I think the economy is about to crash again. There are too many commercial properties out there that are empty. Most of them have been refinanced multiple times over the years because that is the way commercial property owners earned money in the past.
The commercial property bubble is bursting now. I think it will drag us down again.
Do you need to own your home? This is a very important question. Really think about it. Everybody needs a place to sleep and keep their stuff. That place costs money whether you own it or rent it. Other than the financial concerns at moving or selling time, do you actually get any benefit from the space itself if you own it or rent it? By that I mean, is the space any different? A sixteen-hundred square foot space feels and acts the exact same way no matter if it is a rented space or an owned space. The space doesn’t know it is rented or owned. It is just space.
If you put your furniture into a space and arrange it the way you like it, does it matter if that space is owned by you or not? Your furniture would be in the same arrangement no matter what. This is really a philosophical question.
Owning or renting equates to control. Do you have more control when you own property?
If you can get a long term lease with plenty of stipulations that allow you to care for a property and utilize it exactly the way you want to, during the time of your lease, then you have all the control you need. Your contract is your protection.
When you buy a property you can do whatever you want to do with it within government zoning regulations and home owners associations or condominium/cooperative associations allow. That might not necessarily be less restrictive than leasing a property. Your contract with your mortgage holder (if there is one) is what gives you the right to stay in that property until you have fully paid the mortgage holder. Does your mortgage require you to keep the property in a certain level of repair? You can bet you are required to pay for home owners insurance if you have a mortgage.
Control is probably the main reason people want to own a house. It is a good enough reason to purchase one. Even if it doesn’t always make financial sense to buy a house, keeping your mind satisfied is just as good a reason as any other. We strive to create the lives we want to live. If owning property makes life happier then buy something you can afford in good times and bad times.
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