Is homeownership truly better than renting?

[JEDI]

My wife and I (5 years ago) used to live in a 1br apartment for around 600 a month or so. I now own a house.

Please make a big deal about home ownership, if you own a home you have more freedom, it's supposed to be cheaper in the long run, social standing etc... But, I'm starting to think it's probably about the same, if not, it probably cost more.

In most fixed term mortgages you pay interest, many people don't sit down and calculate the amount of interest they are actually paying v.s. the principle. It's almost like a rip-off. Second, you pay property taxes, improvments to home, and the possiblity of losing equity based on what has happend recently.

it only makes sense if mortgage = rent.

the "great" mortgage interest tax deduction is a myth. Property taxes offset that. plus you have to overcome the standard deduciton that the IRS gives you. (ie: $10k?).

so if your mortgage interest + porperty taxes = $12k/yr, then you only get an extra $2k deduction since you get a 'free' $10k.

 

[slackerinabox]

1. Location, location, location..

Gotta live in detroit? I'd probably rent.. NYC area? I'm glad I own, and took advantage of a great interest rate and depressed housing.

 

[vi edit]

Landlords losing $600/mo is not normal.
You are obviously leaving details out of the story.

Yeh. People don't take a $600 month loss because they feel like being nice. It's probably because they appreciate their credit rating and would rather rent for a loss than go into foreclosure on the place. Florida is one of the most depreciated markets in the country for real estate.

 

[IceBergSLiM]

Landlords losing $600/mo is not normal.
You are obviously leaving details out of the story.

Makes sense to me. He is still gaining 1600 in equity but only contributing 600

 

[DaWhim]

I recommend some of you read this.

pretty good detail analysis of owning vs renting
http://patrick.net/housing/prices.html

 

[yh125d]

I'm seriously contemplating trying to buy something in the next 5 years young

I'm 19, have a stable, good job that will only be going up in pay, live in an area with cheap as shit property costs (75k will get you a nice 3bd house with a few acres outside the city)

 

[DaWhim]

Makes sense to me. He is still gaining 1600 in equity but only contributing 600

I actually think the owner's equity has been swiped out and he is underwatered. florida housing market has dropped 40-50% since the peak.

 

[DaWhim]

I'm seriously contemplating trying to buy something in the next 5 years young

I'm 19, have a stable, good job that will only be going up in pay, live in an area with cheap as shit property costs (75k will get you a nice 3bd house with a few acres outside the city)

I am 25 y/o. the world is a big place, the last thing i need is being tied down to a house. carrying a mortgage payment for the next 30 years? I can only see a lot of reasons not to do it.

 

[slackerinabox]

I'm seriously contemplating trying to buy something in the next 5 years young

I'm 19, have a stable, good job that will only be going up in pay, live in an area with cheap as shit property costs (75k will get you a nice 3bd house with a few acres outside the city)

My personal, not financial advice - move the fuck out of a town where 75k will buy you a house! You're young - go search for some tail in a city .. Save up, of course, and make a decision once you meet a lady worth living with or realize that you'll never meet that someone (let's say 30 is a good cut off)

 

[Pantoot]

Landlords losing $600/mo is not normal.
You are obviously leaving details out of the story.

I pay ~$2,000 a month (including HOA/PITI) on a house and rent it out for $1,400. It was either that, walk away, let it sit vacant, or lose right around 30k out of pocket to sell it.

I still haven't seen how much of that I can recoup at tax time. The way I figure it, the tenant is roughly paying my interest portion of the mortgage, I pay down the principal. If home prices don't rebound within 4 years I guess I made a bad choice.

 

[Hacp]

Huh? After 15-30yrs paying on a mortgage, you can have no payments other than property tax, and you are sitting on a paid off house that can be borrowed against/sold in emergencies. If you rent for 15-30yrs, you will still be renting, and have nothing to show for it.

After 30 years, with the money you built up saving, you can just buy the same place and have a few thousand left over.

 

[slackerinabox]

After 30 years, with the money you built up saving, you can just buy the same place and have a few thousand left over.

That would TOTALLY work.. If you live in your mom's basement for 30 years

Rent costs money you know

 

[DrPizza]

Which is better? Depends on the market. Where I'm at, monthly rent is approximately the same cost as a mortgage. The difference is, in 20 years, you'll have complete equity in the home. Of course, you'll also have paid for upkeep for 20 years, but I find there to be no comparison.

Plus, if I want to do something, I can do it. I don't like the fact that my Christmas tree can't be taller than about 7 feet. So, after Christmas, I'm ripping out the ceiling in my living room & vaulting the ceiling. Next year, 12 foot tree (or whatever the finished height will be.)

 

[slackerinabox]

I am 25 y/o. the world is a big place, the last thing i need is being tied down to a house. carrying a mortgage payment for the next 30 years? I can only see a lot of reasons not to do it.

I know a lot of people like you (I'm 28). They'll rent for the rest of their lives.. They always complain about shitty landlords.. Never have large furniture so they can move whenever and for cheaply.. Never have a place they can call their own... They never really ever seem to unpack, really. They just move every year!

It's really, really depressing...Enjoy!

 

[krylon]

My personal, not financial advice - move the fuck out of a town where 75k will buy you a house! You're young - go search for some tail in a city .. Save up, of course, and make a decision once you meet a lady worth living with or realize that you'll never meet that someone (let's say 30 is a good cut off)

There are plenty of "cities" where 75K will buy you a house and not everyone wants to live in NYC.

 

[soulcougher73]

I know a lot of people like you (I'm 28). They'll rent for the rest of their lives.. They always complain about shitty landlords.. Never have large furniture so they can move whenever and for cheaply.. Never have a place they can call their own... They never really ever seem to unpack, really. They just move every year!

It's really, really depressing...Enjoy!

I wouldnt mind this if i was moving city to city, country to country seeing the world. But if just moving to a new place within NY for example that would suck lol

 

[Deeko]

My girlfriend's parents bought a house for 600k in 2006.

They're now in the process of selling it. The only offers they are getting are for 500k.

Talk about great timing of the market.....

 

[Miramonti]

Among other things, it can depend on the wife situation.

wife: "We need this...we need that...we need to replace that.."
me: You "want" this, you "want" that, you "want" to replace the that...we need groceries. *sigh*

She's great but definitely needs occassional reminders of the difference between needs and wants otherwise I think the house would be a pure money pit (even when the house is only 1yr old.)

 

[Slew Foot]

You cant make a global determination for what is better. If youre young and mobile its probably better to rent, once your old and settled its probably better to buy. If your market is full of foreclosure and cheap rentals its probably better to rent, and vice versa.

 

[wyvrn]

This doesn't make any sense in the bigger picture. 30 years paying a mortgage is going to always be better than 30 years paying rent. Eventually you can own the house out right. Renting is literally throwing money away, no chance of return or recovery ever.

of course this assumes you didn't buy in an inflated market and aren't upside down on your house.

I own, for the record. Actually I don't own it yet. The bank does. Then the local taxing authority does. In truth, I will never own it completely. I am merely renting at the cost of PITI. When I pay it off, I will be renting at just the cost of property taxes (T).

And I live in Texas, so not a big property bubble. In fact my home has appreciated over my 5 years of owning it, net net of all value movements.

There have been many comparisons on owning vs renting. It depends on what you want. In most areas, you can rent for cheaper, but you get less space and privacy. Not everyone wants to own a home.

In the end, either renting or owning is a liability. To think of 'owning' a home as an asset is abject absurdity. When all cash flows are considered, it is a liability. That cannot be disputed.

Another thing to consider is maintenance. When you rent, you don't pay it. When you own, you do.

Is it better to own than rent? Depends on what you want. There is not a clear cut answer. Either way, you are going to pay for it, net net all cash flows.

 

[yh125d]

My personal, not financial advice - move the fuck out of a town where 75k will buy you a house! You're young - go search for some tail in a city .. Save up, of course, and make a decision once you meet a lady worth living with or realize that you'll never meet that someone (let's say 30 is a good cut off)

Don't take this the wrong way, but you live in NYC. I live in small-town oklahoma. Your advice is next to useless to someone in my situation.


I work in the city (tulsa), so I (generalizing hugely here) have two options

Pay $600/mo rent for a good but small 1bd apartment for the next 10 years, while living in the city with a 5-20 min commute while I look around to possibly get married. Living the apartment life, with small apartments, noisy neighbors, little personal space, NO outdoor space, not having the satisfaction of ownership (which appeals to me hugely)

or

Pay $500-600/mo to buy a house 20-40 miles out, 30-45 min commute, while owning my home, and living in the country which I am used to and much prefer to living in town



The second option is looking more favorable every time I think about it



Also I should add that the area I might be thinking about buying in has been appreciating very well. For example, my parents bought a property 1 mile off the highway in the boonies, 50m from the city for ~100k 5 years ago, and it just sold for 200k ish


(side note, I have absolutely NO clue what I might be able to expect for an interest rate being young, with a short but good credit history. Anyone got a half arsed clue?)

 

[wyvrn]

While it's true that mortgages are front-loaded with interest payments, it's those interest payments that, when deducted on your income tax filings, that allows most people to get into itemizing their deductions....health expenses, continuing education expenses, state/local taxes, etc.

If you don't have mortgage interest deductions, you typically won't get any benefit from itemizing deductions, better off to just take the standard deduction.

Comparing the two avenues over the decades of home ownership we've had, we've come out much further ahead with owning. We own our land outright and have less than 7 years of "normal" payments left on our mortgage.

Ahh, yes. The tax break argument. You do realize that taxes are only a percentage of the amount paid. So, you pay 100% and get 30% back. Net net, that is a loss. That is why tax credits should never be the driving reason for a financial decision.

And if mortgage interest is the only thing to push you into itemizing, then the standard deduction is better which offers further evidence you should not base the decision to own vs rent on taxes.

If you have come out 'much further ahead' by owning, please do an analysis of all cash flows and post it here. I'd like to see it.

Not against owning because I do. But the argument is not nearly as clear cut as some would say it is.

 

[D1gger]

All I can say is that my home has more than doubled in value since I bought it 18 years ago (including any adjustment to the market that happened in the last 18 months).

We have paid off the mortgage, so all we pay now are taxes, insurance and maintenance ($500/mth) and I get to look forward to these low costs for a long time to come as the asset continues to appreciate. I would have to pay at least $2,500/month plus renters insurance to live in a comparable home, and I would have no asset.

 

[wyvrn]

Yes, equity.

-finance major.

As a finance major, did you ever sit down and calculate what that equity cost you? Care to post it ?

 

[Kev]

I like renting. I like having the money to do whatever I want, whenever I want while I am still young. I don't like the idea of being tied to a house for several decades. Some people in this thread act like renting is equivalent to living in a tenement.

The only reason I see for buying a home is if you have/are starting a family. I do not see it as a legitimate investment option. Oh and another good reason to buy a house would be to get people to stop bitching at me to buy a house.