Conventional wisdom is you're better paying off your own mortgage than someone else's, which is what you're doing when you're renting. However, as we've seen in the last couple of years, the housing bubble burst and perhaps this isn't true anymore as we've witnessed house prices plummeting in certain areas of the country.
Mortgage Finance Charges Are Expensive!
If you buy a house and move within a few years, unless you made some extra principal payments, you've mostly been paying interest and haven't touched much of the principal. What that boils down to is you've been renting your house from the mortgage company.
At the same time, you've have taxes, insurance and maintenance costs to pay, so even if the value of your home increased, that appreciation went right out the window with the costs you've incurred to maintain your house.
What House Appreciation?
Yep, the value usually goes up, but when you factor in the housing bubble, and depending on when you bought your home, you probably didn't have that much appreciation anyway; if you're lucky, 5%. That barely keeps up with inflation. As mentioned earlier, that does not take maintenance into consideration. I just spent over $6,000 to replace my air conditioning unit; a must for Texas summers!
If you bought during the bubble, your home is now worth a lot less than what you paid. Many people are shying away from the housing market after being burned in the last bubble.
Renting Gives You More Mobility
If you're renting an apartment you're not stuck in a house you can't sell if you find a job in another location; that other location being on the other side of town or the other side of the country. Many people are trapped because they can not only sell the house for the price they paid for it, but it might not sell at all, as banks aren't as quick to loan as they were a few years ago.
Additionally, it's easier to pack up, lock up, and go travel when you aren't tied to a house with a yard and all the other upkeep that goes along with it.
Take Advantage of Apartment Amenities
Would you be able to build a gym in your house? How about a clubhouse? Perhaps you could build a pool, but talk about maintenance, not only is the maintenance expensive, but it's time consuming as well. Most apartments not only offer these conveniences, but often they are state-of-the-art and rarely used.
The Rule of 15
Many times people wonder whether it's best to rent or buy. If you're looking at a comparable house and an apartment in the same area, then apply the rule of 15:
- Annualize the rent by taking what you would be paying in monthly rent and multiplying it by 12 ( $1,200 x 12 = $14,400 )
- Take that and multiply by 15 ( $14,400 x 15 = $216,000 )
- If that number is less than the selling price of the house, then renting is a better value in the numbers.
Do you know of any other advantages of renting over buying?