Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
I would hate to know I've paid 30 years worth of rent payments and have nothing to show for it.
As long as the rent payments were less than the interest + property taxes + insurance + maintenance paid to own the house, you would still be ahead.
That's probably pretty rare over the long term, however, because of inflation (rent goes up with inflation, while mortgage principal and interest do not).
I've lived in apartments all my life and it's worked out for me. I've moved around a bit because of work, either changing jobs or, frankly, losing them. And so I've always held off of buying a house. Obviously, I know the most basic "pro" of renting is that you have freedom of movement with no repercussions. So I told myself "wait until you're at the point in your life when you're in a secure job and then buy a house." Makes sense. But as the years have gone on, I've realized that's basically never. Sure, there are lots of people (most?) who just stay at their job for decades, but there's also the possibility of always losing your job even tomorrow for at least a large majority of people. So I chucked that out the window recently and decided I was going to buy a house. Good idea or bad idea? Here is my thinking.
Apartment living in and of itself doesn't bother me. I don't mind renting space. But I'm at the point in my life where I get aggravated hearing other people on the other side of a wall. Or hearing people walking around on my ceiling/their floor. I don't like having to smell people smoking. There's an area for recycling/trash and it aggravates me when people throw their garbage in the recycling bin -- not because I'm an eco-warrior, but because it's right next to the dumpster, which means they literally don't care what they're doing. I don't like having to find parking or having to share parking with people who will squeeze right up next to your car.
OK, so that sounds like I'm fed up. But is "fed up" a good enough reason to buy a house? My biggest "makes sense" reason is that I'd rather sink money into a monthly mortgage than into a monthly rent.
Most people I know were fairly positive about the idea of buying a house. But then I talked to a friend and he said don't do it. He made it seem like buying a house was the worst decision in the world, with huge upkeep and hidden costs, as well as property taxes. Essentially, he said there was almost no reason ever to buy a house (which is sort of drastic, but I guess is technically true, since anyone can rent always). So ...is buying a house crazy? Or crazy for me to do? Or makes sense?
No, not crazy. Go buy one. Owning a house gives you rent control and privacy and the right to alter anything inside or outside your home however you like. As long as you can afford to keep paying the mortgage, you will never be kicked out.
Also, real estate tends to appreciate over time. Some day you may sell the house and get back all of your money, plus some profit. Also, you'll get the tax deduction for mortgage interest. Think of it as not just paying rent, but putting money in the bank for use later. Make yourself rich instead of making someone else rich.
You didn't mention whether you have a family, but a house is extremely handy should you decide to get married and possibly have kids.
If it's a financial stretch to buy a house and keep up the mortgage payment, which frankly it is for a lot of us, consider getting a roommate or two. Roommates can be a pain, but as the owner, you are the lord and master of your house and can get rid of difficult ones.
If you need to move to a new location for a different job, you can rent your house to a trustworthy tenant (granted, not that many are trustworthy but they do exist) and then they are paying your mortgage for you.
There's an old saying: The best time to buy a house is 20 years ago. The second best time is today.
If you have a family (wife, husband, kids) then you buy a house. Otherwise they're optional. I bought one because I knew I could resell and come out ahead, at auction. Otherwise people who just go and buy the first new house that comes up for sale, you have to own it 5 years before prices appreciate enough to guarantee a profit once the realtors and banks get their cut. I was looking for 3 years before I got mine... this is by far the best bang for the buck house I came across during this time so the other close calls I had that didn't pan out ended up being a good thing. There's so many components to a home that could need updating... it's best to learn up on what they are and buy the most updated house you can get for the price you pay.
I could rent a studio for $425/month in this town which would be less than half of what I pay to own a house, and I probably would if they made apartments with good soundproofing and made people who were considerate and didn't think subwoofers and musical instruments in apartments were acceptable, but they don't, so I'll live in my home. I really did enjoy my apartment, the location, the paid for utilities which means I kept the heat at 68 degrees day and night all winter, the lack of lawn mowing and maintenance.. it was nice. I got 7 years of very quiet apartment living before a loud person moved in below... if I flipped this house and invested the profits in a portfolio of stocks, those stocks would outperform the house.. but the noise.. the noise...
We were idiots at first and just went with the "normal" 30 year mortgage, you pay a TON of interest up front and build nearly no equity for a number of years. Our current house is a 10/1 ARM (meaning the interest is fixed for 10 years then can increase at a maximum of 3% for the next 5) with a 15 year "pay off"... the payments were the EXACT SAME as a 30 year traditional. So, $350/month for 15 years or 30, which would be better? Given that most people move at least every 5~7 years, a loan that has a fixed rate for that time and then either a balloon or adjustable rate, makes a lot of sense. No reason you can't refinance before that change if you plan on staying (and I highly doubt that interest rates are going up anytime soon). Get educated on these things though.
I disagree with this advice. The "idiots" (like me) who went with a fixed 30 year mortgage are the ones who still own their homes after 2009. The brilliant geniuses who went with an ARM got foreclosed, and can't buy a house again for 7 years because their credit is shot.
The best approach has always been, and continues to be, a 30 (or 15 if you can afford it) year fixed mortgage with the best possible rate you can lock in. Rates are rising, so if you get an ARM, thinking "no problem, I can always refinance to a fixed later) you will definitely pay more regardless whether your ARM resets or you get a fixed 4-5 years from now.
He made it seem like buying a house was the worst decision in the world, with huge upkeep and hidden costs, as well as property taxes.
This comes up all the time.. And at the risk of getting into another argument with other life-long renters who refuse to believe it, I'll say it yet again...
The belief that renters do not pay property taxes is one of the biggest fallacies ever. You might not get a tax bill in the mail, but don't assume for one second that your landlord doesn't have it figured into your rent. I own rental property and I absolutely do. Same with those "hidden costs"
Rent is not cheap at all. But don't take my word for it though... Go to Zillow and pick out a house in your zip code at random. See what the estimated mortgage is, then compare that to the estimated rent for that exact same house. Then look at other rentals in the same area and compare prices... Chances are the rent will be higher.
If you're not ready to buy for reasons X, Y, or Z, that's fine... But if you think you're saving money by renting then I have some bad news for you.
Buying is always far cheaper than renting for a given amount of square footage. ALWAYS.
Yes, there are maintenance costs - but that's built into your rent. Its not like you're getting a free ride on maintenance if you rent. In a lot of ways, its a lot worse - because now you have to wait for someone else to hire yet a third (or more) person to actually do it, and they'll only do it when they get around to it and to a minimum level.
You get a tax break on the mortgage interest on top of the fact that your monthly payment, including insurance and taxes, will be less than your rent (unless you go hog wild and get a much much bigger place).
Where I live, renting a house the size of the one I currently live in is $1700 a month - up from $1300 a month when I first moved here 3 years ago. I am paying about $600 per month including taxes and insurance on my home that we bought 6 months ago.
I actually pay less for this entire house than I would for a crappy apartment in a terrible neighborhood in an unsafe complex where there are rats, roaches, drug dealers, and crack whores. Those run $700 to $800 per month.
Or for $500 a month I could live in an old hotel that's been turned into rental units, where you have one room and the bathroom, and a window air conditioner will run you an extra $100 a month. Also the management will come into your "unit" without prior notice and when you're not even there to "inspect" on a regular basis. Oh yeah, and no parking. That's also extra, if the converted hotel had an underground garage.
Those are just expensive flophouses.
Instead, thanks to the wonders of owning your own home, I have 1400 sq ft that I can afford to pay for and still have enough money left for everything else I need, and even a little bit left over for what passes for fun for me these days.
Where I live in SW Florida it is definitely cheaper to buy a small house than it is to continue to rent depending on if you have to pay HOA fees or not. A 2 bedroom apartment is going for over $1200. You can buy a single family house for $135K at a 4% interest rate for $645 NOT including taxes and insurance. Still cheaper than being in an apartment where you are stuck dealing with people all around you. My upstairs neighbors have hardwood floors and they are heavy on their feet. Sometimes I feel like I will just scream. Thankfully I should be out of here and in my own home in the next few months.
OP if you have a stable job now and think you will stay in your area at least 5 years it might be worth it for you depending on how much rents are in your area and what your taxes would be like.
I purchased my 1st home at 24 for the following reasons:
1. Rent kept going up every year
2. Needed a tax write off.
3. Wanted neighbors that hopefully stayed put longer than a year.
4. Wanted to be able to make changes to my space without being restricted.
5. Wanted to build equity
Depending on your budget, your mortgage can sometimes be equal to or less than rent. You can then write off the property taxes and mortgage interest. Home buying is not for everyone, but for others it makes sense.
Buying certainly makes more long-term financial sense than renting UNLESS you have a pattern of losing jobs.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
But is "fed up" a good enough reason to buy a house? My biggest "makes sense" reason is that I'd rather sink money into a monthly mortgage than into a monthly rent.
