Five
Reasons You're Losing Money By Renting
2011
brought us one of the best markets buyers have ever had to make a
transition. A combination of low interest rates and bargain prices
can allow someone to purchase a home with a lower monthly cost than
we have seen in years. If you're able to buy now, you could lose tens
of thousands of dollars, even by waiting a year or two.
Rent
Money Is Gone Forever. When you rent a house or apartment, you're
paying for your landlord's investment. When the property goes up in
value, that benefit goes to your landlord. There is no return or profit
on money you pay in rent, and you have not purchased ownership in
anything. You are still making a mortgage payment. You're making the
landlord's mortgage payment, PLUS something extra, so they can make
a profit on their investment.
You
Are Losing A Major Tax Deduction. There are several tax benefits
associated with a home purchase and home ownership. You may be able
to deduct interest paid on your loan, points paid on your loan, mortgage
insurance premiums and real estate taxes paid, which can add up to
thousands of dollars in deductions. Renters do not get any of these,
so when you rent, you are paying taxes on a higher adjusted income.
Rent
Goes Up, Mortgage Payments Don't. Landlords charge rent based
on the current market, not based on when you moved in. Rent normally
goes up at least every two or three years, and in many rental communities,
it goes up every year. This means it will get more and more expensive
to stay there. If you get a fixed-rate loan (which is generally the
smart thing to do), your payments for principal and interest are established
at the time you get the loan, based on the interest rate and the amount
you borrow. The tax and insurance portions of your payment can increase,
but this is not anywhere near as significant as the increases in rent.
Your
Own Home Is An Investment With A Guaranteed Tenant. Any investor
would be thrilled to have an investment property that is always rented.
If you're renting, you are paying the money anyway, but to cover your
landlord's investment, not your own. If you spend that same money
towards a mortgage payment, it is paying off YOUR investment. If you
choose to bring in a roommate, then someone else can be helping you
pay for your investment. Plus the main person living in the house
is someone you like - YOU!
When
You Own You Are Building Up Equity. Equity is the interest you
have in a property, and it has value. Equity is built up in two ways,
by having the value of the property increase, and by paying down the
balance of the loan. If you stay in a house for the life of a thirty-year
loan, you could gain hundreds of thousands of dollars. Many homes
purchased in the 1970's for $60,000 are worth over $300,000 now, and
are paid off, so it's 100% an asset for the seller. If you sell your
house after five or ten years and buy a new one, you will transfer
that equity over to your new home. If you rent over the same thirty
years, you will spend hundreds of thousands more, and have ZERO!
Additional
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