For most, housing costs take up the largest portion of our budget. If anything else took up as much of our budget as housing costs, we would probably scrutinize that spending. For instance, if your electricity bill took up over one-third of your budget, you would find ways of reducing electricity costs. You would think twice about turning off lights when you left the room. You would investigate energy efficient appliances or even solar power. However, because housing is a necessity, we don’t often subject that portion of our budget to as much scrutiny as we do other spending priorities. Perhaps we should. By making sure we get the most bang for our buck for our housing expenses we can truly impact our ability to generate wealth. If you really scrutinize whether or not it is best to rent or buy a house, it’s clear that renting doesn’t make sense. 

Buying a House is Investing in Yourself 

No matter what, you are going to spend a significant portion of your budget on housing. The question is whether you should spend it on rent or on mortgage payments. One of the big reasons why it is far better to make mortgage payments than rent payments is that mortgage payments are investing in yourself. When you pay your rent, you get the rights afforded to you in your leasing agreement. That’s it. The money you spend gives you a roof over your head, but ultimately, it goes into the bank account of your landlord. Making mortgage payments also gives you a roof over your head, but it also helps build your assets and wealth. 

Some people are reluctant to buy a house because they do not like the idea of taking on so much doubt. However, that is not the best way to think of taking out a mortgage to buy a house. Sure, you are obligated to pay back the amount of your mortgage plus interest. But rent is a form of debt too. When you sign a lease, you are making an obligation to pay the total amount of rent over the length of your agreed upon lease. People do not seem to think of renting as a form of debt. Perhaps it has to do with the short-term nature of rent agreements or the fact that it is only discussed in terms of monthly installments, rather than a lump sum. The big difference between rent debt and mortgage debt is that paying off your mortgage actually helps you acquire assets.

Your mortgage payments go toward paying off the interest you owe on your home loan, as well as your principal. As you pay off your principal, the total amount you owe on your home loan decreases. Eventually, you will owe less on your mortgage than the value of your home. When that happens, you have equity and equity is an asset. By making your mortgage payments you are actively contributing to building home equity, which is literally investing in yourself. There is no investment equivalent for paying rent. 

Rent is Getting More Expensive

Aside from the fact that paying rent increases your landlord’s wealth and not your own, rent is getting more expensive. From May of 2020 to May of 2021 rent prices increased a whopping 6.6% for single-family units. High-price rentals increased even more over that same period. Rent increased for high-price rentals by 7.9%. While home prices have also risen, mortgage payments for existing homeowners have not, as long as they have fixed rate mortgages. If you have a fixed-rate mortgage, your mortgage payment will be the same throughout the life of your loan. This means that your housing budget will remain the same year-after-year if you own your house, but will increase year-after-year if you rent. 

Having a fixed price for your housing costs can give you a lot of stability as a household. First, it makes your housing expenses predictable, which meakes it easier to plan for. Second, it means that you will not be priced out of where you live. This is a problem all too familiar with households in Boston, in neighborhoods like Dorchester, as well as surrounding areas like Quincy. Rent is becoming unaffordable, which is forcing many middle class families to make the difficult decision to leave Massachusetts altogether. Meanwhile, housing values are increasing in these same areas. Buying a house in places like this at today’s low mortgage rates allows you to stay where you love and take advantage of rising home values. Renters feel the pain of rising home values, but homeowners rejoice because that makes it easier to build equity.  

Final Thoughts

When it comes to how you spend your money, something to always keep in your mind is that if it don’t make dollars, it don’t make sense. As you can clearly see, rent doesn’t make sense. All you are doing is lining the pockets of your landlord while keeping yourself vulnerable to price increases. Buying a house and taking out a mortgage allows you to take back your financial power, stabilize your housing expenses, and invest in yourself. The bottom line is that buying a house makes dollars and sense. 

If you are ready to start investing in yourself and want to buy a home of your own, contact us. We can give you a complimentary, no-obligation mortgage qualifier. From there, our professional mortgage brokers will work with you to find a home loan program that is perfect for your needs and situation. Take back control over your housing and just say no to renting.