Whether You Rent or Buy, You’re Paying a Mortgage

Tyson T Reeves
Tyson T Reeves
Published on September 19, 2016

There are some people that have not purchased a home because they are uncomfortable taking on the obligation of a mortgage. Everyone should realize that, unless you are living with your parents rent free, you are paying a mortgage – either yours or your landlord’s.

As The Joint Center for Housing Studies at Harvard University explains:

“Households must pay for housing whether they own or rent. Homeowners pay down their own principal while households that rent pay down the principal of a landlord plus a rate of return.  

That’s yet another reason owning often does end up making more financial sense than renting.”

“Access to homeownership remains critical for building wealth. While there now is little question that buying a home can result in financial losses, homeownership over long periods has allowed many households to accumulate a level of wealth they would not have otherwise (Di, Belsky, and Lui, 2007). With wealth even more unevenly distributed than income—and with income, wealth, and credit scores on average lower for minorities than whites—access to mortgage credit for homeownership for lowincome and low-wealth borrowers will likely have major implications for the severity of wealth disparities moving forward.”     ~Harvard University

Christina Boyle, a Senior Vice President, Head of Single-Family Sales & Relationship Managementat Freddie Mac, explains another benefit of securing a mortgage vs. paying rent:

“With a 30-year fixed rate mortgage, you’ll have the certainty & stability of knowing what your mortgage payment will be for the next 30 years – unlike rents which will continue to rise over the next three decades.”

As an owner, your mortgage payment is a form of ‘forced savings’ which allows you to have equity in your home that you can tap into later in life. As a renter, you guarantee the landlord is the person with that equity.

Interest rates are still at historic lows, making it one of the best times to secure a mortgage and make a move into your dream home. Freddie Mac’s latest report shows that rates across the country were 3.43% last week.

Bottom Line

net-worth-buying-vs-renting

net-worth-buying-vs-renting

As the graphic shows buying and owning supports a family’s new worth by drastic measures over renting. Even having a mortgage, which means you have a debt payment; your principle is constantly decreasing while your value, equity and net worth continue to rise.

 
Whether You Rent or Buy, You’re Paying a Mortgage
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