buying a home

Whose Mortgage Are You Paying?

shannonjones Buying a Home , Featured Articles Leave a Comment

Buying a home is a major financial step and the prospect of taking on a mortgage can be daunting for some first-time home buyers. Yet one thing to note is that unless you are living with your parents rent-free, you are already paying a mortgage — either yours or your landlord’s.

A research paper from the Joint Center for Housing Studies at Harvard University reported: “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.”

Also, if you purchase with a 30-year fixed rate mortgage, your “housing expense” is locked in over the 30 years for the most part. And with interest rates below 4 percent, this is absolutely the time to lock in that cost. If you rent, the one guarantee you will have is that your rent will increase over that same 30 year period.

As an owner, the mortgage payment is a “forced savings,” which will allow you to have equity in your home you can tap into later in your life. As a renter, you guarantee the landlord is the person with that equity.

Bottom line: Whether you are looking for a primary residence for the first time or are considering a vacation home on the shore, owning probably makes more sense than renting since home values and interest rates are still lower than they’re projected to be. If you’re interested in buying a home in Long Beach CA or surrounding communities, please let us know and we’d be happy to help. Want more information on buying a home? Request our Buyer Guide by filling out the form below.

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