Renting vs. Buying a home

[CdnCarrie]

I get peace of mind and that makes it worthwhile to us.

I get that. I have some single friends who have chosen not to buy as they don't want to do with unexpected emergencies. I do get that. Even as a single woman I owned my own place. I like home ownership.
To me it's also saving for retirement. I know in a few years my mortgage is paid and I have that equity (and mortgage free housing) to retire on. That's my peace of mind.

 

[Mackenzie Click-Mickelson]

You might think it's stupid but remember mortgages are 30 year commitments. You aren't just buying a house, you are also paying the bank approximately 4% interest, front loaded on the loan, maintenance and upkeep, and property taxes.

Not everyone has a 20% down payment for a house. Very few can purchase a home with cash upfront.

We have been renters for 17 years now. No regrets. We have moved 3 times in 17 years. We are military.

The house we currently rent costs $3250/month. It is 2 years old and worth $950,000. Say we wanted to buy it. We have no money for a down payment saved. So let's just mortgage the full amount, shall we? Including property tax and HOA fees, our monthly payment would be $6364.61 FOR 30 YEARS. Total housing cost excluding maintenance/upkeep would be just about $2.2 MILLION. That would translate to 56 to years of rental payments...

I mean, the house we rent costs $1000/month in property tax ALONE. $350 in HOA fees. I think we are actually making out like bandits living here for only $3250. I can invest the $3000 extra in the stock market (theoretically) and have an almost guaranteed 7% return. If I did that for 56 more years, I would have $35,685,504.00.

Tell me again how renting is stupid. Buying a home only makes sense if you plan to live in that home until you die, and you can pay off the mortgage as quickly as possible.

The housing market has a historical appreciation of 3% since it began tracking data. The stock market has outperformed the housing market at an average return of 8% since inception.

A house is a place to live. It is not an investment unless you own it and rent it out, thus putting money in your pocket every month. Otherwise it is a liability, a continued expense. Just like rent. Except most times rent is cheaper than owning overall. Renting is not throwing money away. It is paying for a roof over your head. No different than any other necessity.

The 20% thing just saves you from PMI but it's not the worst thing in the world. We refinanced 2 1/2 years after getting our house due to the market. In all we paid $4,800 in PMI costs. And while that sucks (it amounted to 3 1/2 months of rent of our rental house we had just before our current home) it sure beat the heck out of coming up with $60k more in cash for a 20% down. Yes yes we could have spent less on a home but you get the picture PMI isn't the worst. It should however be considered with all other factors.

Now yes we have a monthly mortgage that is higher than rent and an HOA fee per year and homeowner's insurance (though we had renter's insurance when we rented) our utility bills are actually less than our rental home (despite our house being a 2-story vs 1 story and 2,700+ sq feet vs 1,500 sq feet) due to the appliances and overall housing construction quality (rental house was built in 2006 but was a crap-shoot built starter home and our house was built in 2014 and is an energy star rated home). The only utility that costs more is water when we are watering our lawn in the summer time (as we didn't have to water the rental house lawn as much and there wasn't as much of it). Now renter's insurance costs is quite a bit different in costs compared to homeowner's insurance but they are covering different things and different amounts of things. Even paying property tax in the end isn't too terrible all things considered.

Now you're right about investing but usually when the conversation is brought up between renting and owning it's not in the context of someone actually investing (and investing in a stable good market-type way too that yields long-term growth and results) their money but usually in the context of spending money on rent of a place that is not your own or spending money on a mortgage for a home that is yours (plus mortgage debt is generally considered good debt vs bad debt so it can in cases boost your credit score).

 

[georgina]

I can't even fathom paying $3250 a month in housing costs. Yikes!
No one I know took 30 years to pay off their mortgage. Most people seem to get a 25 accelerated mortgage and pay it off in 21 years unless they upgrade to a larger house and take out another mortgage.
I can't imagine renting for 17 years, paying $3000 in housing costs and no savings. Everyone is different I guess.
We live in a lower cost housing area so $900,000 homes are not the norm. It would buy a mansion here!

My son pays $2000 a month for a 1 bedroom apt in Seattle, he lived for 2 years in New York City before that. DD is sharing a 5 BR house in SF that goes for $6500 a month, which is a really great deal for that area. They are both in computer fields and still socking away a lot of money in savings each month.

 

[barkley]

If you started renting, how/when did you decide it would be the smarter investment for you to buy? Or what made you decide to keep renting instead of purchasing? Anything you wish you knew before buying?

We are thinking of setting up a meeting soon to see what we would be pre-qualified for and how we can prepare to buy our first home, but it's a scary feeling! We do pretty well but I'm always scared we will never be able to afford anything decent.

we had been married a few months and I got to thinking about what dh and i had individually paid in state/fed income taxes as singletons. I knew that being married didn't offer much of tax break so I made an appointment with my cpa and asked what the benefits for us would be as homeowners vs. renters. she ran the numbers and it worked out such that we would save money. we talked to a lender who tried to convince us how much we could 'afford' which was WAY more than we wanted to spend so we figured out what we were comfortable with (and had already looked at what insurance and property tax rates were like in the areas we would consider buying in), got preapproved for that amount and then connected with a realtor. we moved into our first home a week before our first thanksgiving as a married couple (and managed to pull everything together to host dinner for our family).

we stayed in our first home 7 years then could afford to buy a larger new home that we stayed in the next 7 years. we are in our 'forever home' now. no regrets.

But, when things break in the house, I sure wish we could rent

I remember when the first thing broke in our first home-dh and I were like 'what do we do, this is landlord stuff-we've never had to deal with this stuff before-i wish we had a landlord to call'. then when we had to live in rentals both times in between selling our existing and taking possession of the next and something broke we were left to grumble 'we called the landlord about this x days ago-I liked it better when we owned and could just take care of this stuff on our own and get it done'

 

[Turn the Page]

We bought our home about 2 years ago and plan to be here long term. We love the house itself but it will need some upkeep over the next few years. We got it inspected before we bought it of course but our inspector was a joke. I don't know who built the place but several things aren't up to code and a lot of shoddy 'home improvement' projects were done by people that have no business around a hammer. Three weeks after we moved in we found out we needed a new roof, we have light switches that we can't figure out the purpose of and lights we can't figure out how to turn on, DH can't figure out what sections of the basement are connected to which breaker, the furnace and water heater are about to die, the kitchen is in desperate need of updating, and the studs in the walls are not regulation distance apart. We sure do love it though. I just hope we don't end up regretting the purchase.

In our experience though, renting is worse. Yes, we have to pay for it when things break or need replaced but at least we know it gets done which was not the case with landlords we have had in the past.

 

[CdnCarrie]

My son pays $2000 a month for a 1 bedroom apt in Seattle, he lived for 2 years in New York City before that. DD is sharing a 5 BR house in SF that goes for $6500 a month, which is a really great deal for that area. They are both in computer fields and still socking away a lot of money in savings each month.

Great for them! Not sure what it has to do with my post in the least but that's great! I hear those are really expensive places to live whether your rent or own.

From MY perspective in MY location I think renting (for the most part) long term is not the best decision. I realize not everyone can afford it but we have a great housing market and it can be easy to get a starter home.

 

[mummabear]

You may see it as stupid but if my washer, dryer, dishwasher, and fridge all die within months of each other I can call my landlord to replace them, not have to shell out thousands.

Here in NZ none of those would be provided by your landlord anyway.

 

[tasha99]

I can't even fathom paying $3250 a month in housing costs. Yikes!
No one I know took 30 years to pay off their mortgage. Most people seem to get a 25 accelerated mortgage and pay it off in 21 years unless they upgrade to a larger house and take out another mortgage.
I can't imagine renting for 17 years, paying $3000 in housing costs and no savings.
Was rent that high everywhere you lived?
We live in a lower cost housing area so $900,000 homes are not the norm. It would buy a mansion here!
No HOAs in our province. Condos do have condo fees. Not sure if they are common in other provinces.

Your situation is so vastly different from my experience I cannot even compare it.
No one I knows pays anywhere near $3000 a month in housing costs.
I know one person who owns a house close to $900,000 and they put the equity of $400,000+ from their other house into it when they bought it.

Average home here is $250,000-#300,000. I have seen ads for rental homes for $1700 a month and always think you could own for less than that.

My husband used to have a really expensive house in Westchester County--expensive, but not all that fancy. He picked if for the school district, and there were no rentals there. Thing is, when he sold it, he actually made a decent amount of money in only a few years. That COULD have gone the other way though. If you buy an expensive house, that money is at risk when you sell. He only had 20% down, so a market downswing could have either trapped him in the home or financially ruined him. There are benefits to home ownership, but there are a lot of risks, too, especially in certain markets.

 

[Mackenzie Click-Mickelson]

Here in NZ none of those would be provided by your landlord anyway.

I know as far as appliances in rental homes it was less common for fridges in my area to be included and washer and dryer was 50/50. But as far as maintainence involved here if it's the landlord's item it becomes the landlord's responsibility to fix unless otherwise specified in the rental contract.

For instance in our rental home the landlords gave us the usage of the washer and dryer they had. If we wanted them to take care of any maintainence or repairs we had to pay them $25 per month for the washer and $35 per month for the dryer OR we could take care of it ourselves and all repairs would be on us. We opted to take care of it ourselves. The fridge was included along with all other appliances so if something had failed there it woud have been on them to fix it. In apartments however it was included however washer and dryer was 50/50 chance at being included in the apartment itself.

I was lucky that in the apartment I lived in my last 2 years of college and then the apartment I lived in before moving into the rental house included a washer and dryer and maintainence-wise it was the apartment complex's responsibility to fix (along with the fridge, dishwasher, even the air filter for the furnace was on them to replace). More often than not a microwave typically is include in apartments though sometimes they were not.

 

[CdnCarrie]

My husband used to have a really expensive house in Westchester County--expensive, but not all that fancy. He picked if for the school district, and there were no rentals there. Thing is, when he sold it, he actually made a decent amount of money in only a few years. That COULD have gone the other way though. If you buy an expensive house, that money is at risk when you sell. He only had 20% down, so a market downswing could have either trapped him in the home or financially ruined him. There are benefits to home ownership, but there are a lot of risks, too, especially in certain markets.

Agreed. Canada didn't have the huge housing bust the USA experienced a decade ago so I guess I don't think about the risk of home ownership so much. It probably is much harder to sell a really expensive property as there is a smaller market for that price range.
Our city (in my time of home ownership - 20 years...) hasn't experienced a downswing.

 

[dotfurio]

DH and I both grew up in rental homes, and when we got married it really never occurred to us to buy a house. After a couple years of renting a house, a good friend of ours went out to look at model homes with us for fun. She pointed out to us that we could actually afford these homes for a little more than what we were paying in rent, and we'd have equity. I am so grateful that she talked us into becoming homeowners.

When we first bought we had a 30 year fixed loan with nothing down. So thankful we didn't get the adjustable rate mortgage. We had some friends and family who lost their homes because of those types of loans.

A few years later when interest rates went down we refinanced and were able to switch to a 15 year fixed loan for less than the monthly payment of our 30 year loan. Rentals in our area cost more than our mortgage payments, so I'm really glad we own now and it'll be paid off so fast.

 

[Lilacs4Me]

We have owned 2 houses, and have rented two. We will continue to rent for the next 5 years until DS12 graduates high school, and move back to our home state. At that time we will look for a house to buy.

We rent now because although we are in this area for our careers, we do not want to spend over $300k on a 1200 Sq foot house that has a leaky basement and is so close to the house next door that I can touch both at the same time, which is the average home around here. We always agreed to stay here until the kids are out of school, then go back "home" for our middle aged years and beyond.

We pay rent to a management company, who is on call for us 24/7 when we need something. When our basement flooded the first year we lived here, they sent people in to clean it up and waterproof the basement with drain tiles. It was a $10k fix. When the sump pump burned out, they replaced it. When we need a new furnace filter, they drop a box of them off. They redid all the pipes under our sink because the drain was running slow. Pretty much anything we need is just a phone call away.

Being previous homeowners, I can say that the peace of mind knowing our home is taken care of has allowed me to sleep at night! Trading a bit of equity and a small tax deduction for zero $$ in home repair and maintenence makes renting in our circumstance worth it to us.

 

[ronandannette]

You may see it as stupid but if my washer, dryer, dishwasher, and fridge all die within months of each other I can call my landlord to replace them, not have to shell out thousands.

We've owned and rented, both scenarios more than once over the past 20-odd years. TBH, the purchases were more risky financially than the renting ever was, but both served their purposes given our circumstances at the point in time. We own now and once this mortgage is paid off we will immediately sell, retire and rent for the remainder of our lives (anybody else on the Freedom-75 plan?!? )

I get that. I have some single friends who have chosen not to buy as they don't want to do with unexpected emergencies. I do get that. Even as a single woman I owned my own place. I like home ownership.
To me it's also saving for retirement. I know in a few years my mortgage is paid and I have that equity (and mortgage free housing) to retire on. That's my peace of mind.

Good for you, but that doesn't make anybody else's choices stupid. {{sigh}} It seems like this type of discussion always polarizes into criticism of people who do things differently. It also strikes me as odd to assume (not you in particular, CdnCarrie, but in general) that people make major life-choices like this without actually knowing what they're doing - that they haven't thought it through.

 

[greentea]

We own because I wanted control over my living situation, the ability to get things fixed right away or replaced, and the ability to have pets without worrying about size/breed/etc. Also, our mortgage is lower than a lot of rent prices in my area.

If you have a good landlord/management company renting can be pretty good. We didn't have the greatest experiences, unfortunately -- one time our apartment complex decided they were going to replace the doors, so they just took everyone's doors off for the day. Not one at a time as they went, just a whole row of doors lined up in the grass and a bunch of apartments sitting wide open for *hours* (luckily one of us was able to stay home, ugh). At least in my house no one can take my door off without my permission? Hah.

I do sometimes wish I could have someone else dealing with maintenance. I don't see renting as a waste or throwing money away at all. Renting provides its own benefits, including flexibility, and owning a house has a lot of costs. We had a new roof and some electrical work done recently, and I'm pretty sure we'll need to replace our water heater soon.

 

[ronandannette]

We own because I wanted control over my living situation, the ability to get things fixed right away or replaced, and the ability to have pets without worrying about size/breed/etc. Also, our mortgage is lower than a lot of rent prices in my area.
If you have a good landlord/management company renting can be pretty good. We didn't have the greatest experiences, unfortunately -- one time our apartment complex decided they were going to replace the doors, so they just took everyone's doors off for the day. Not one at a time as they went, just a whole row of doors lined up in the grass and a bunch of apartments sitting wide open for *hours* (luckily one of us was able to stay home, ugh). At least in my house no one can take my door off without my permission? Hah.

I do sometimes wish I could have someone else dealing with maintenance. I don't see renting as a waste or throwing money away at all. Renting provides its own benefits, including flexibility, and owning a house has a lot of costs. We had a new roof and some electrical work done recently, and I'm pretty sure we'll need to replace our water heater soon.

Did you read that thread not long ago about the HOA that required everybody to leave their garage doors open at all times during the day? Crazy, I tell ya...

 

[mousehockey37]

We bought our home about 2 years ago and plan to be here long term. We love the house itself but it will need some upkeep over the next few years. We got it inspected before we bought it of course but our inspector was a joke. I don't know who built the place but several things aren't up to code and a lot of shoddy 'home improvement' projects were done by people that have no business around a hammer. Three weeks after we moved in we found out we needed a new roof, we have light switches that we can't figure out the purpose of and lights we can't figure out how to turn on, DH can't figure out what sections of the basement are connected to which breaker, the furnace and water heater are about to die, the kitchen is in desperate need of updating, and the studs in the walls are not regulation distance apart. We sure do love it though. I just hope we don't end up regretting the purchase.

In our experience though, renting is worse. Yes, we have to pay for it when things break or need replaced but at least we know it gets done which was not the case with landlords we have had in the past.

How were you even allowed to buy it? With all those things wrong, unless sold AS IS, you probably shouldn't have bought it. And if the inspector was a joke, make sure to make some phone calls and turn them in. Also, you did you have a 2nd inspector go through? Sounds like a pretty big uphill battle but hopefully everything happens one at a time and you can make it work.

All that said, I would love to own a home. I'm sick of renting, having neighbors above, below and to the sides. I'm sick of parking space games. I want a driveway where if someone parks in my driveway, well, let's just say you don't wanna park in my driveway, lol. The hard part here is... I'm looking to better my career options. This area is hospitals and food and not too much else. Needless to say I don't work in food and I'm not in the medical realm. Also, home prices keep going up, taxes are high and there's just no such thing as job security anymore. So trying to "settle" is somewhat apprehensive. Granted, I find the right house, I could maybe move away from living check to check, but who knows.

 

[kimblebee]

We've owned and rented, both scenarios more than once over the past 20-odd years. TBH, the purchases were more risky financially than the renting ever was, but both served their purposes given our circumstances at the point in time. We own now and once this mortgage is paid off we will immediately sell, retire and rent for the remainder of our lives (anybody else on the Freedom-75 plan?!? )

Good for you, but that doesn't make anybody else's choices stupid. {{sigh}} It seems like this type of discussion always polarizes into criticism of people who do things differently. It also strikes me as odd to assume (not you in particular, CdnCarrie, but in general) that people make major life-choices like this without actually knowing what they're doing - that they haven't thought it through.

You’re totally right. I like it much better when we agree

Between my health issues and my husbands it makes way more sense for us to rent. I agree, we pay more in rent than we would for a mortgage, BUT, for us, not having to do repairs and have surprise costs like a new roof makes up for it.

Our landlord is great though, if we need something done it’s usually done in a day or two (when my heating element went in my stove I had a new one the next day). If it’s something small we’ll tackle it ourselves or ask my dad (a jack of all trades) to help out.

 

[Happyinwonerland]

I don't understand how people who are renting think they aren't shelling out thousands for repairs and interest payments. The property owner builds money for repairs into the rent price, then sets it aside until those repairs are due. Just as a responsible owner would set aside a fund each month for house repairs.

I don't see anything wrong with renting. although in our situation (1 kid, 1 large dog, 1 small dog), I feel better about owning. But I think people are kidding themselves if they think they aren't paying for repairs and interest through renting.

 

[dosekies]

Thanks everyone! I completely agree that I would rather be putting the amount we pay in rent towards a mortgage, but I am scared we will never be able to afford a house! We are 20 somethings with student loans and a car payment and while we have money saved, it is definitely not a lot. Both rent (especially since we have a dog) and houses are pretty expensive where we live, so I guess I'll just have to see how it goes with the bank!

 

[CdnCarrie]

Thanks everyone! I completely agree that I would rather be putting the amount we pay in rent towards a mortgage, but I am scared we will never be able to afford a house! We are 20 somethings with student loans and a car payment and while we have money saved, it is definitely not a lot. Both rent (especially since we have a dog) and houses are pretty expensive where we live, so I guess I'll just have to see how it goes with the bank!

Good luck! Nothing more satisfying than getting the key to your first home! If it doesn't work out now keep working at it and try again in a few years.