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Owning vs Renting: Why High Rents Are Worse Than a Mortgage over the Long TermIf you’re at the stage in life where home ownership is nearly within your reach, you’re probably wondering whether you should start looking for a home or whether you should just keep renting. Renting is easier, people say, and it gives you more mobility. But over the long term, all that rent money can really add up – and it eventually reaches a point where buying a home is a better deal.

So why is paying a high rent a worse option than buying a house and getting a mortgage? Here’s what you need to know.

Renting Doesn’t Generate Equity

One of the single biggest sources of wealth in the United States is home equity – as you pay down your mortgage, you invest more and more of your money into your property, and it appreciates in value. When you eventually sell that home, you make a profit. The monthly payment is something you’d have to make anyway, whether you rent or own – but when you rent, your monthly rent money lines someone else’s pockets, while when you own, paying down your mortgage actually creates wealth for you.

Renting Doesn’t Give You Access To Homeowner Tax Credits And Deductions

There are all sorts of tax benefits available to homeowners that renters simply can’t access. As a homeowner, you can deduct your mortgage interest from your taxes owing, reducing your taxable income – but there’s no such deduction for renters. You can also deduct property taxes and some closing costs when you buy a home – there are no corresponding tax benefits for renters.

There are also several tax credits available to homeowners that aren’t available to renters. Things like renovations or simply buying a home for the first time can give you tax benefits that renters can’t access.

If You Can Muster Up A Down Payment, Owning Is Cheaper In The Long Run

One of the biggest hurdles keeping young people out of the real estate market is the down payment. It’s not easy, but if you can save up enough money for a down payment, you’re actually better off buying a home than continuing to rent.

According to Trulia, the median home price in metro Houston in Texas is just under $163,000, while the median monthly rent for an apartment is $1,550. That means renting would cost $18,600 per year, while buying a home (assuming a 20% down payment and 30-year term) would cost $9,384 per year in mortgage payments. In other words, owning is about half as expensive as renting in the long run.

Renting may be a good short-term solution, but over the long haul, owning is almost always better. Call a local mortgage professional to learn more.

Renters Missed Out On Tens Of Thousands Of Dollars This Past YearRent has gone up significantly during the past year. Even though it is not unusual for rent to go up over time, the average rent across the country has increased significantly during the past year. This means that the average rent will probably be even higher next year than it is this year. Even though this is one of the biggest deterrents against renting, there are other reasons to get out of the rental market as well. 

Renters Stand To Lose More Money This Year

One of the biggest reasons why renters are losing so much money is that the average value of a house has gone up significantly. During the past year, the average value of a home in the United States increased by more than $50,000. This means that the average homeowner gained this amount of money in equity. Renters do not get the same benefit. Because renters are not investing any money in property, they are not seeing any return on the money they throw away in rent. This means that renters lost tens of thousands of dollars by renting this past year instead of owning. 

Renting Can Be Very Expensive

A lot of people do not want to purchase a house because they are scared of maintenance expenses, property taxes, and the size of the down payment. On the other hand, renting is like throwing money down the drain. The money is going directly into the pocket of the property owner, and the renter is not seeing any sort of return on that investment. Furthermore, even though the price of renting can go up over time, many people who take out a mortgage lock in the rate for 30 years. This means the monthly payment will be the same at the end of the loan as it is at the beginning of the loan. If someone has a steady job, their income is likely to go up during the course of the mortgage, meaning that they have more financial flexibility in the future. Renters need to think carefully about what they can do to get out of the rental market and purchase property before rent increases in the future.