A few days ago, we shared an article from Forbes that compared the cost of renting a home versus purchasing a home. If you’re ready to purchase a home but are still standing on the sidelines, here are a few more reasons to get off the bench: the true costs of opting to rent rather than buy.
FACT: Renting Costs Nearly Twice as Much
as Buying in the Long Term.
Reason #1: Rent Hikes versus a Stable Monthly Payment
We’ve all heard it: the rental market is hot right now. Unfortunately, this means that rent prices are increasing rapidly nationwide – meaning you’ll pay more to live in the same home every year. Even if the rental market cools and simply keeps pace with inflation, a 3% increase in your rental payments each month will cost you. Just look at these figures from Forbes:
“A homeowner with a $1,500 monthly payment would still be writing the same check fifteen years later while prices everywhere increase around them. If rents . . . simply kept up with inflation at a 3.2% annual increase, a $1,500 rent payment would cost that renter nearly $900,000 over the next 30 years. The same $1,500 payment made to their mortgage would be only $540,000 (because the payments don’t increase with inflation) and of course would end with a final payment.
Reason #2: No Home Equity Means Higher Cost of Living During Retirement
While renting may seem easier or “safer” in the long run, the fact remains: countless studies show that homeownership is the safest way to build wealth and equity. A homebuyer that builds equity over a 30 year mortgage enters retirement with a tangible, valuable asset: a home. Plus, entering retirement with a home that is paid off means you won’t have to worry about paying a mortgage – especially important as saving for retirement becomes more challenging.
Reason #3: Missed Tax Benefits
Mortgage interest and property taxes are tax deductible – meaning you’ll pay fewer taxes (or even get a refund) at the end of the year. That’s simply more money in your pocket! Plus, homeowners get a large break on taxes when the time comes to sell.
Putting it All Together:
As compelling as all of the financial advantages of owning a home are, the bottom line is that owning a home allows you to improve your life. Our friends at Keeping Current Matters expressed this best in a recent blog post called “Why Do You Want to Buy a Home?“:
“What if the reason you are moving isn’t about finances? Does it still make sense to delay? That depends on why you are buying. What if your purchase is more about improving the quality of life for you and your family? Or moving into a school district where your child’s talents will be maximized? Or being closer to friends and family? There is a cost to delaying any of these decisions.”
How much will it cost you to delay purchasing a home?