I commonly hear that as a renter you’re just losing your money with no equity built.
I’ve been a homeowner for a few years now, and currently this is my opinion on the matter:
As a homeowner your mortgage is likely much higher than the local rent rate. The interest part of this payment is gone forever, similar to a rent payment. You also pay into the equity of the home. But unless you own outright, or at least a very substantial portion, you’re effectively renting the property from the bank (via interest) to pay off the home over time and eventually own.
There’s a few caveats that I feel many overlook. First, taxes are expensive. And they’re also a sunk cost with a capped tax write off. Renters don’t have this obligation. Homeowners insurance as well, and any reason to use said insurance will drive this annual cost up. Also, repairs and maintenance. If you don’t keep up with the house, then the equity degrades, leading me into my final point.
There is no certainty the value of the home will appreciate. It’s actually very possible that the equity decreases to a level where you owe more than the property is worth. Renters don’t have this potential problem. On this note, if you miss 3 payments on a mortgage then even if you’ve faithfully paid interest for 20 years the bank can now begin a foreclosure process. You’ll get some of your equity (I believe) but in no way will you get a good deal out of this.
Tl;dr: I think renting is a lower risk living option than homeownership and a lot of the people I talk to who want to own a home overlook many of the risks and responsibilities.
What do you think?
Submitted May 29, 2019 at 02:29PM by HyerStandards http://bit.ly/2XbPTKJ
