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Buying Is Better Than Renting For These Clear Reasons
Buying and owning a home is without doubt a better financial decision compared to renting.
Yet there are always renters who would argue otherwise… mostly with qualitative reasons rather than being supported by numbers.
If you have never been a renter, good for you. You probably have parents who are still footing the bills.
But for most of us, we have lived in a rented house at some point in time.
I remember a moment I looked at the dull living and feel that improving and decorating it would give everyone in the house a lively boost.
Yet I just cannot bring myself to go ahead and spend that money on a house that’s not mine.
There are many types of examples that tell the same tale.
This is one big reason why I’ve become pro-ownership rather than pro-renter.
If these things don’t bother you one bit, maybe the numbers will… and will ultimately why you should be buying your own house as soon as you can afford it.
Paying your own mortgage
It must have dawned on you at some point that a tenant is effectively paying for the landlord’s mortgage.
Why not use that rental money to pay for your own mortgage?
Not convinced? Here are some hypothetical numbers to crack your brain with.
Let’s say that both you and the owner each earn a yearly personal income of $90,000. Then let’s also assume that the rental payment equates to $1,500 and the mortgage payment is $1,500 too.
If a renter continues to rent for the next 20 years, at a 5% rental increase annually, by the end of 20 years, a tenant will be paying a whopping $3,970 for rental each month.
Whereas for a homeowner, who is the borrower, at a 30 year fixed rate mortgage at 7%, he would continue to be paying $1,500 each month towards the mortgage without change.
No wonder owning a house to save on rental makes sense!
But that’s not all.
At a personal income of $90,000, both of them would be in the 25% tax bracket.
The renter would pay $22,500 in taxes while the owner would pay much less than that after deducting for interest payments and property tax.
These are savings that a renter will never be able to see on his tax statements.
All the above is happening while property is appreciating in value.
It’s a fact that in recent years, that real estate prices has been volatile. It has yet to fully recover from 2008.
But it’s generally accepted, and backed up by historical data, property values tend to go up over time.
This increase home equity can either be drawn upon as previously mentioned, or help the owner cash in on a fatter check should the house be sold in future.
These are gains which you hardly have to work for.
Moreover, it will help you buy that bigger and better house that you have dreamed of.
With the reasons above, it should be clear that buying your own house is definitely a better idea than being a perpetual renter.
And if you need more convincing, just ask your landlord.