Breaking It Down: Owning Vs. Renting
There are some serious benefits to owning your own house. It’s natural to buy in the mode of instant gratification – and when I hear “own it” I think, “Mow it, shovel it, fixing the toilet, dealing with the flood, patching the holes, lost in the screw isle of the hardware store…and more shoveling.” Laziness about the extra work that comes with the deed being in your name is immense. But remember:
- Tax Benefits – Deduct the interest you paid on your mortgage from your federal and state taxes. Work with the Income Tax Planning Network to maximize your benefits and therefore return…
- Leveraged Appreciation – You put 3-20% down. Let’s say it was $5,000. Imagine the black hole of rent money, AND now you pay less than you would have for rent per month. That’s gone…off your principle mostly…Now age yourself 19 years and you sell. You are gaining everything on the money DOWN that you wouldn’t have paid if you rented, and now all that appreciation is yours…or your kid’s because you’d pay for a kid’s college. Spare them starting the race like an amputee? And you? Have your legs under you…Retired. Ready to roll? In an RV?
- Equity – Your piggy bank IS a house, and the money within it imaginably ranges with the market like a barometer. Homes are well priced right NOW and interest rates won’t stay this low forever, so lock in that 4ish% soon.
- Predictability – Three words: Fixed. Rate. Mortgage.
- Freedom – The house is yours. Want to leave your wet towels on the floor? Go ahead. Want to put nails in improper places poorly? Go ahead. It’s yours. No landlord knocking unwanted on the door, ever.
- Savings – Rent is going up! Mortgage payments are often cheaper than paying rent! (Of course, because probably your land lord has a mortgage, pays it with your rent and then makes a profit to pay his/her own mortgage!) Mortgage Insurance, which you’ll need if you put less than 20% down…is cheaper right now. Down payments can be cheaper too. A credit score of 620 can get you 3% down with programs like this!
Renting It: Pro Et Contra
- No Other Choice – You don’t have much money and you have to live somewhere. You don’t own anywhere so by default – rent it is.
- Flexibility – Living in a more fluid, adaptable world renting holds with the uncertainty of the rest of it. Staying with the same company for 30 years? Pf-ft. Getting married in your 20’s? Pf-ft. Settling down with kids? Later. Renting is the flexibility that matches the flexibility of today’s life cycle structure…
- Repair Credit History – Rent payment history is a great way to repair your credit, check out this article here. And this one for the mysterious credit score debunked read this article…
- Save for Down payment – By renting below your means. “The general guideline is that you can afford to spend about 25%-30% of your gross monthly pay for your rental costs. But if you were to only spend, say, 15-20% of your income on your rental, and rent something a little less costly, you could afford to put away hundreds of dollars a month toward your down payment.”
- Risk Adverse – Its a spooky time to buy. You remember the 2008 housing collapse. You get that its a shaky recovery. You see the rising prices of all good that even with a 30 fixed rate mortgage you don’t buy in. You are ready to fly the coop not nest in.
- Other places to Invest Money – Perhaps you see other, better returns on investments. If you are a savvy risk taker stocks or a less concrete investment is more appealing to you.