Rent vs. buy

Rent vs Buy

Shannon Buying a Home , Featured Articles Leave a Comment

Rent vs Buy:  Either Way You’re Paying A Mortgage

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 when they are considering the “rent vs buy” options, 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 benefit of securing a mortgage vs. paying 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 an owner, your mortgage payment is a form of ‘forced savings’ that allows you to have equity in your home that you can tap into later in life. As a renter, you guarantee your landlord is the person with that equity.

The graph below shows the widening gap in net worth between a homeowner and a renter:

rent vs buy

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 with home values and interest rates projected to climb.

Contact Form

We would love to hear from you! Please fill out this form and we will get in touch with you shortly.
About the Author

Shannon

Leave a Reply

Your email address will not be published. Required fields are marked *