The Advantages of Ownership
Rent vs. Buy
It should cost you less to own a home than to rent. There is a fairly simple
calculation that will tell you this:
Take your monthly rent and multiply by 200 =
purchase price of home
$ rent per month x 200 = $
Example: $900 X 200 = $180,000
In this example, the payment on a $180,000 home
would be comparable to a $900 monthly rental payment.
In addition to the current cost of renting vs. buying, you must also take
into consideration the future cost. As a renter you are exposed to future rent
increases because it is reasonable to expect an annual increase of 4% per year
to your rent.
There are many advantages to home ownership. The value of a home usually
increases during the years that you are paying your loan down. This increase in
equity builds up the wealth that you accumulate in your home. Even without this
expected increase in value, paying on a mortgage over 20 years can guarantee
that you will own your home free and clear when you retire.
This reduction in monthly housing expense is something many retirees look
forward to. If you choose to trade down after retirement to a less expensive
home, you can use the difference in value to free up a lot of extra income you
currently have in your home. The home equity you are building in your home can
also be borrowed against at some future time for college expenses, vacations,
remodeling the home or almost anything else you might need the money for.
Another benefit to home ownership is that you are not subjected to the
intrusion of a landlord. Generally no one can tell you what you can and can not
do with your property. If something is broken you are not at the whim of someone
else as to when, how, or why, it should be fixed. A landlord can decide to sell
the property and put you out into the street.
As a homeowner, you have the security of knowing that you have a place to
live, as long as you continue to meet all your mortgage obligations such as
timely mortgage payments, timely payment of tax and insurance obligations.