Paying Rent Is Not A Good Investment

Dated: 11/04/2014

Views: 561

There are some people that have not purchased a home because they are uncomfortable taking on the obligation of a mortgage. Everyone should realize that, unless you are living with your parents rent free, you are paying a mortgage - either your mortgage or your landlord’s.
As a paper from the Joint Center for Housing Studies at Harvard University explains: 
“Households must consume housing whether they own or rent. Not even accounting for more favorable tax treatment of owning, homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord plus a rate of return. That’s yet another reason owning often does—as Americans intuit—end up making more financial sense than renting.”
Also, if you purchase with a 30-year fixed rate mortgage, your ‘housing expense’ is locked in over the thirty years for the most part. If you rent, the one guarantee you will have is that your rent will increase over that same thirty year time period.As an owner, the mortgage payment is a ‘forced savings’ which will allow you to have equity in your home you can tap into later in your life. As a renter, you guarantee the landlord is the person with that equity.

Bottom Line

Whether you are looking for a primary residence for the first time or are considering a vacation home on the shore, owning might make more sense than renting since home values and interest rates are still at bargain prices.

Latest Blog Posts

3 Reasons To Use A Real Estate Pro In A Complex Digital World

3 Reasons to Use a Real Estate Pro in a Complex Digital WorldIf you’re searching for a home online, you’re not alone; lots of people are doing it. The question is, are you using all of your

Read More

What You Need To Know About The Mortgage Process

What You Need to Know About the Mortgage Process [INFOGRAPHIC]Some Highlights: Many buyers are purchasing homes with down payments as little as 3%. You may already qualify for a loan, even if

Read More

Homeownership Is The Top Contributor To Your Net Worth

Homeownership is the Top Contributor to Your Net WorthMany people plan to build their net worth by buying CDs or stocks, or just having a savings account. Recently, however, Economist 

Read More

Whats The Latest On Interest Rates

What’s the Latest on Interest Rates?Mortgage rates have fallen by over a full percentage point since Q4 of 2018, settling at near-historic lows. This is big news for buyers looking to get more for

Read More