Buy or Rent – Things to Consider

There are some renters who have not yet purchased a home because they are uncomfortable taking on the obligation of a mortgage. Know this, unless you are living with your parents rent free, you are paying a mortgage – either your mortgage or your landlord’s.

As 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.”

Christina Boyle, a Senior Vice President, Head of Single-Family Sales & Relationship Management at Freddie Mac, explains another advantage of paying a mortgage vs. paying monthly rent:

“With a 30-year fixed rate mortgage, you’ll have the certainty & stability of knowing what your mortgage payment will be for the next 30 years – unlike rents which will continue to rise over the next three decades.”

As a home owner, your mortgage payment is a form of ‘forced savings’ that builds equity in your home you can tap into later in life if needed. As a renter, you guarantee your landlord is the person with that equity.

Take a look at the widening gap in net worth between a home owner and a renter:

Real Estate Bottom Line

Whether you are a first time home buyer or even considering a vacation home at the beach, owning might make more sense than renting with home values and interest rates projected to climb.