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Buying vs Renting a House - Is Paying a Mortgage Better than Renting?

My first house--what a feeling!

My first house--what a feeling!

Is it better to buy or rent?

If you can pay rent, you can probably pay a mortgage payment, too. If your job is secure, or you know you could get by and still pay your mortgage if you lost your job, then you might consider buying a house instead of throwing your money away on rent.

According to a recent report by CNN, it is actually cheaper to buy than to rent. Why? Home prices have gone down, as have interest rates. Rent payments are often higher than monthly mortgage payments.

The biggest hurdle to buying a house is usually coming up with the down payment. If you can come up with that lump of money, then you should consider investing in your own house instead of continuing to put money into the pockets of someone else.

What is equity?

The equity in your home is what you have invested in it monetarily above what you owe. For example, if you bought a $150,000 house, and you now owe $120,000, you have $30,000 in equity in the home.

How to pay off a mortgage faster

With a mortgage, every month you are paying on something that you will, hopefully, eventually own. With rent, you are paying nothing that you will ever get back. I've always heard that if you plan to stay in a house for at least three years, then it is worth the return to buy rather than rent.

After three years, it is likely that you will have built enough equity in your house to at least break even when you sell your home by getting back the amount you have paid into it. When you rent, you never break even. You lose everything. You lose every penny that you put into a rental. With a home, you might even make a profit over the original price.

By paying just a bit more every month, you can also pay down your mortgage and build equity much faster by knocking off interest. Just designate $100 (or more or less!) every month toward the principal, the amount of the loan that you owe besides interest. This amount will be taken from the loan amount, rather than just off the top with interest. This is another way of putting away savings for yourself, as the equity in your home grows faster than it would if you simply paid the minimum payment every month. Paying down the principal will also reduce the amount of interest you will have to pay over the life of the loan.

Home ownership gives hope of an easier life, too. Eventually, it is very probable that you will pay off the mortgage. With rent, you never have the hope to finally be free of that monthly payment.


Home Improvement

Added a porch the year after moving in. Overhang, posts, and railing.

Added a porch the year after moving in. Overhang, posts, and railing.

Practical Tips on Buying vs. Renting

You can improve your own property!

With owning your own home, you don't have to check with a landlord if you want to paint the walls or replace the front door. You just decide what you want to do and you do it.

Home projects can be fun and exciting. With my first little house, I had a porch added to the front, something that would keep the rain off the front door and give a protected seating area. I added a bench and a couple of chairs, making my new cozy spot a popular hangout for my buddies and me in graduate school. I enjoyed that porch immensely, and it has added to the attractiveness and value of the house.

In my current house, I added a wood privacy fence shortly after moving in. It was exciting to be able to do that for my dog's safety and my privacy from my neighbors. When I plant tulips or bushes, I know that they are for my own property's enhancement, not that of my landlord.

I have added insulation in my attic, an attic fan in my hallway, and silver tube skylights in my kitchen. I have treated and painted the concrete on my patio with a colorful heavy-duty paint to withstand weather and cat claws. All of these improvements have enhanced my home and made my life in the home more pleasant.

Of course, home repairs are something that you have to pay for yourself when you own a house. You can't just call the landlord to fix the problem. Still, when you pay for these home repairs and improvements, they are on your own property for you to enjoy. In addition, home improvements can increase the value of your property if and when you decide to sell.


Home Buying Kit for Dummies--or First Time Buyers! Or Perhaps Buyers Who Just Want to Be More Prepared!

Is it EVER better to rent?

There are reasons that it may be better to rent for a while. Many first time buyers can't afford a down payment. That chunk of money may take a while to save. In my twenties, I lived in a cheap studio apartment for five years. It was cramped, yes, but life went on, and five years later I was putting a down payment on my first little 800 square foot house. I was ecstatic!

If you move a lot for a job, renting may make more sense for you. Remember the three year guideline. How long do you think you'll be at that address?

Mortgage payments often are less than rent payments, but there are other things that may prohibit your being able to purchase a house for a while. If owning your own home is important to you, consider sacrificing in the meantime by looking for a place you can rent fairly cheaply in order to save for your future home.


Need More Help? Here's the Complete Idiot's Guide to Buying a Home

Owning your own home

I love having my own house. It's not just a place I'm staying that belongs to some landlord. The house is mine. Well, sort of. It's mine and the bank's. But eventually, sooner rather than later with extra payments that I make, it will be all mine.

I'm in a bigger house now, but I was able to keep my first little house to use as a rental property, which basically means someone else is now paying the mortgage for me. What a great investment! That little house is a source of income that will eventually be mine free and clear.

I plan to go into my old age without a mortgage or rent. I can focus on utilities, food, health insurance, and other necessities. No matter how tight money might be in the future, I will be assured of a place to live rent-free. To me, that means financial freedom and peace of mind.

I've never regretted living frugally to save money for a down payment for a house. I've never rued that day I signed the mountain of papers tying me to a house. Even when I have unexpected and painful expenses, I accept them as part of my investment, the ups and downs of owning a home. Having my own place to call home is a great feeling. Buying a house was one of the best moves I have ever made.

More Information

#28/30

#28/30

Rent or Buy?

Comments

Victoria Lynn (author) from Arkansas, USA on April 07, 2013:

Kittymeowmeow--Yes, for some, the mortgage is cheaper. And it's neat knowing that you can do whatever you want with the house. I'm not going to be paying all that interest that people pay either, as I'm paying extra every month. When I had a high-paying job for a few years, I really paid down the mortgage. I was scheduled to pay it off in about 7 years or less after I bought it. A bit behind now, but I'll still pay it off early and save thousands upon thousands of dollars and be debt free before I'm 50! :-)

Victoria Lynn (author) from Arkansas, USA on April 07, 2013:

poshcoffeeco--That's too bad--sounds like a bad situation. I thought everyone could get care in the UK; why not that child?

Thanks for the input. :-)

Kittymeowmeow from United States on April 07, 2013:

What a great article. Just bought my first home after 5 years of renting. I just can't believe how much cheaper it is monthly. Also gives me lots to do with painting and other renovations.

Steve Mitchell from Cambridgeshire on April 07, 2013:

Buying is definitely the best option. It is there for you later in life so you can have it sold from under you when you have to go into a nursing home. This happens to so many elderly people in the UK. You work hard for 45 plus years for what. Sorry I sound cynical but the UK is getting worse. Government ride rough shod over the most vulnerable in society.

We no longer expect to pass on our houses to our children, only to the treasury.

Only today in the papers is a story where a woman get's a boob job done on the NHS and a child with cancer is refused treatment on the grounds of cost. Obscene.

Nicely written article all the same. Apologies for being a killjoy.

Victoria Lynn (author) from Arkansas, USA on April 05, 2013:

Hezekiah--You make some valid points. Someone who moves a lot probably doesn't want to buy unless they're going to be there for several years. Thanks for your comments.

Hezekiah from Japan on April 04, 2013:

A lot of it depends on what you want for you children if you have any. Owning property may not only benefit yourself but puts a roof over your children head too, if they decide to stay.

Also one must think about age, and their employments plans. Constant jobs relocation maybe difficult if you buy property.

Victoria Lynn (author) from Arkansas, USA on April 04, 2013:

Yes,Tom, there are many different circumstances that affects any individual's ability to buy or rent. I don't separate out payments, but I do pay extra at the beginning of the month any time I can. I've paid off over half the mortgage in just a few years that way. There are ways to pay down the mortgage early, for sure. Thanks for your input!

Tom Schumacher from Huntington Beach, CA on April 03, 2013:

Although under most circumstances it is better to buy than rent, however, it really depends on the market, cost of money, and inventory. Also, paying more than the agreed monthly mortgage payment might subject the borrower to a pre-payment penalty. Before doing this refer to your contract. An option to consider: A borrower can divide the monthly mortgage payment into two equal installments paid on the 15th and then again on the 30th. By doing this, you, the borrower, pays down the principle faster which equates to savings lots of money that would otherwise accumulate as interest charges.

Victoria Lynn (author) from Arkansas, USA on March 27, 2013:

karma--There are first time home owners loans, but I've never heard about a $30,000 equity. Where does it come from? Interesting . . . .

karma123456 on March 27, 2013:

Is it still possible these days to qualify for a first time home owners loan when you are automatically starting out with a $30,000 equity?

Victoria Lynn (author) from Arkansas, USA on March 14, 2013:

City Girl--What horrible experiences. So sorry you're had such a hard time with your house. That is awful! Thanks for chiming in!

City Girl on March 13, 2013:

JamaGenee, we are with you. Our house has been one disaster after another, to the tune of $100k in maintenance and upgrades on a $375k house in 6 years. We are now finishing up after flood #3 in 3 years from this sub-standard 'model' home. Never mind that we bought all the bells and whistles to prevent disaster...it still happens, and you get to pay for all the repairs. The HOA won't even let us use white paint for our exterior trim! How's that for home ownership! We are now going to rent a high rise condo with hotel amenities...forever. We have not saved one dime on home ownership...it's been a hellish nightmare!

Victoria Lynn (author) from Arkansas, USA on March 05, 2013:

torrilynn--Buying works for some, while renting works for others. I've found buying a house to be a great deal for me. Thanks for the comments.

Victoria Lynn (author) from Arkansas, USA on March 04, 2013:

xstatic--Thanks! I'm glad you think I cover all the bases! There are so many to cover!!!

Victoria Lynn (author) from Arkansas, USA on March 04, 2013:

JamaGenee--Whatever works for the person, right? I'm just looking to not having a mortgage or rent while I'm still just in my 40s! And I could stand to make a major profit if I decide to ditch the house and downsize. It excites me. But I understand the freedom of renting, too, especially if you love the place you live and it's affordable. Glad to have this discussion with you. I can see either way, depending on the situation. Thanks!

torrilynn on March 04, 2013:

Hi Victoria,

I've always wondered what the difference in price was buying a house and

renting a house. thanks for the info. shall be useful in the future.

voted up

Jim Higgins from Eugene, Oregon on March 04, 2013:

This is really an informative hub. You cover all the bases of buying vs. renting very well.

Joanna McKenna from Central Oklahoma on March 04, 2013:

Oops. I hadn't read this hub! My memory was serving appetizers, not a full meal. That said, I find your arguments for buying just as logical as mine for renting. And the comment you left on my "Own vs Rent" hub is so true! It IS a matter of circumstances, lifestyle, personal preference, etc, meaning we're simply on opposite sides of the same coin. Hurrah for diversity!

Renting just happens to suit my particular lifestyle, therefore I've never felt I was "throwing my money away". Instead, I look at rent as a small price to pay for the convenience and peace of mind of NOT having to fork out big bucks for routine maintenance and major repairs **on top of** the mortgage, property taxes and home owner's insurance. Money that I might or might not get back when I'd want or need to sell. But that's just me.

Great hub! ;D

Victoria Lynn (author) from Arkansas, USA on September 21, 2012:

glassvisage--It's great that you saved 20$ to avoid the mortgage insurance. I didn't, but I was kind of ignorant about it at the time. When I found off what it was, I paid on my mortgage aggressively to get it off there! Good for you on buying a house! I hope you are enjoying it. It's great to have your own place!

glassvisage from Northern California on September 20, 2012:

Thanks for this Hub! I just bought my house after a year of looking. I had decided to because, even though my rent was cheap, I was pretty much throwing that money away when I could be investing in a house instead. I did want to wait until I had 20% for a down payment though - I didn't want to pay for mortgage insurance, or HOA fees for that matter.

Victoria Lynn (author) from Arkansas, USA on August 09, 2012:

Awesome, robie! I'm glad we could link to each other on this important topic!

Roberta Kyle from Central New Jersey on August 08, 2012:

Great explanation of the dynamics and advantages of owning your own home and I totally agree. Love the pictures-- especially the one of you with the " sold " sign. Am putting a link to this in the body of my hub on tips for first time homeowners. It has great info and a perfect explanation the meaning of " equity"--that word people are always saying but never define:-)

Victoria Lynn (author) from Arkansas, USA on August 02, 2012:

Thanks for the input, marybelle. Some companies really do make it easier than others. I plan to stay in my current home for quite some time, fortunately!

marybelle770 on August 02, 2012:

Reading your posts brings back memories of the experience I had while buying my house in Miami Beach. Gilles Rais Fine Homes made this process a light weight for me. The Rais team went above and beyond to ensure I got the greatest value for my home . Their service is incomparable! You should check them out at www.gillesraisfinehomes.com (954.305.1579), I highly recommend them to anyone looking for the ‘best in business’ when buying or selling their home.

Victoria Lynn (author) from Arkansas, USA on July 15, 2012:

monicamelendez--Great time to buy! I'm glad you took advantage of the market. Thanks for sharing!

monicamelendez from Salt Lake City on July 14, 2012:

I just got married and we were looking for a house to rent. We found that what you're saying is exactly right - it's cheaper to buy right now than it is to rent. We would have had to rent a smaller or much older place to make it cheaper. We ended up buying. Best decision ever and way lucky with the timing.

Victoria Lynn (author) from Arkansas, USA on April 30, 2012:

cloverleaffarm--I'm aware of those things that renters don't have to pay for, but when my mortgage is paid off, i won't mind paying for repairs here and there. I'm looking forward to paying off my mortgage before I'm 50 years old. Hopefully! At least one day it will be paid off. Rent goes on for life. And I'll get money back if I sell it. Anyway, thanks for the comments. Lots of think about, that's for sure!

Victoria Lynn (author) from Arkansas, USA on April 29, 2012:

So true, moonlake. I bought right before houses really went down in price. Just missed a great deal. Still, I have a lot of equity in my house and still plan to pay off early and make a profit if and when I sell one of these days. Thanks for the comments and vote!

Victoria Lynn (author) from Arkansas, USA on April 29, 2012:

andrewcrter--Thanks for the input! Much appreciated!

Healing Herbalist from The Hamlet of Effingham on April 28, 2012:

I rented for years, and bought my first house just 6 years ago. While it has been wonderful "owning" the house, we have been thinking of going back to renting. There are so many more expenses when you own, than when you rent. When you rent, you pay the $800 a month (or whatever) and go on with life. If you own, you pay your mortgage, then have to pay for that new furnace that just blew, and on top of that have to figure out who to hire to paint the house. Oh, and the sump pump just blew. The basement is flooded. No landlord to call.

I have been on both sides of the fence, and at this point, I am not sure which side of the fence I will land on.

Great hub, and thought provoking, I thought.

moonlake from America on April 28, 2012:

I think it's always better to buy if you can. Renting, your money is just going down the drain and not into something for yourself. Homes are cheap now. Voted Up.

Victoria Lynn (author) from Arkansas, USA on April 28, 2012:

Robert--Yes, DO write an article about your experience. And thanks for the compliment about my writing and for sharing!

andrewcrter from USA on April 28, 2012:

Nice hub! I also agree thta buying a home is a better option than renting! Thanks

Victoria Lynn (author) from Arkansas, USA on April 27, 2012:

Hi, am301986. I just figure that if I'm going to pay expensive rent, then I might as well pay a mortgage instead. That way, one day I'll have no payment at all. It works for me. And I will get something out of the house if I sell it. Thanks for your input, though. Buying isn't great for everybody.

Robert Erich from California on April 27, 2012:

Victoria this is a great hub and I agree completely - buying is MUCH better. I will have to write an article about my experience sometime. You are an excellent writer (as your many followers suggest) and I am definitely sharing this article.

Victoria Lynn (author) from Arkansas, USA on April 27, 2012:

Thanks, jpcmc! I appreciate your reading and commenting!

am301986 from New Delhi on April 26, 2012:

Good article! but I always prefer renting then buying a house in today world. I fell that it good to invest some where else other than buying a house. Their is lots of fact I collected over. I generally believe in living for today than for tomorrow because tomorrow is unpredictable for everybody. Although cheers for your article. Thanks for sharing.

JP Carlos from Quezon CIty, Phlippines on April 26, 2012:

It's alwasy best to own your home. You're right, it's a good investment.

Victoria Lynn (author) from Arkansas, USA on April 26, 2012:

What you say makes sense, Nordy. Thanks for the input. People have to go with what fits their own lives.

Victoria Lynn (author) from Arkansas, USA on April 26, 2012:

jasmith--People need to be in a good position to consider buying a home, that's for sure. I do think there are times and situations when renting is best. Thanks for reading!

Nordy from Canada on April 26, 2012:

As one who has rented, owned and now rent again, there are definitely advantages of both. If you are in a place for the longterm, then buying only makes sense. If the market goes down, you have to be prepared to sit it out and wait for it to go back up again before you sell. In the short term, renting can help you save money, depending what you are renting. We are renting a condo where the bills (minus electric) are all included, so we can actually save a lot more a month to invest in other things than we could in our house. 35 years down the road we would have had equity in our house, but we don't plan to live in our city that long so it didn't make sense.

Jen Smith from UK on April 26, 2012:

Thanks for another interesting hub. Myself and my husband often talk about this topic. We own our home which we are pleased about but I think there are instances where renting can be better - it really is down to the situation I think. In the UK at least I think there can be too much emphasis placed on owning and it has seen some people get into trouble with not being in a position to keep up with payments.

Victoria Lynn (author) from Arkansas, USA on April 25, 2012:

Thanks, effer. That's great information from someone working in the field! I think that you SHOULD write a hub about it. It would be really helpful!

Victoria Lynn (author) from Arkansas, USA on April 25, 2012:

Paul--I can see the advantages in renting at times, but a far as a long term investment, I think that having one's own house that is paid for (hopefully eventually) is an awesome thing! Still, for some people at certain times, renting may be the way to go. I appreciate your input on this! Thanks! And thanks for sharing it!

Suzie from Carson City on April 25, 2012:

Victoria....Since retirement (11 years) My husand & I have owned a Realty Services Company. We could easily devote 8 to 10 hours per day, 6 days a week into this very active market, should that be our choice.

95% of Americans will always prefer ownership to renting their place of residence.

There are very few people and very few situations when renting is the better or more sensible choice.

For a complete and detailed explanation to this fact, I would need to follow your lead and compose a hub.

Very excellent information here, Victoria! UP++

Paul Richard Kuehn from Udorn City, Thailand on April 24, 2012:

Victoria, this is an excellent hub and as a homeowner myself I can understand the advantages of buying a home rather than renting. You can, however, make a case for renting rather than buying. Considering that a lot of homes have not appreciated but rather depreciated in the recent housing slump, the money that a person spent buying a home could just as easily have been invested in the stock market where a higher profit could have been made. When you own a home, you have to pay property taxes and insurance which can amount to a lot if you live in a nice house in a new neighborhood. Also, if you are a renter you don't have to pay for a furnace or water pipes which might break. Home repairs can amount to a lot at times. Voted up as interesting and sharing.

Victoria Lynn (author) from Arkansas, USA on April 08, 2012:

I totally agree, millionaire! A great time to buy a home....And our hubs do compliment each other--awesome!

Shasta Matova from USA on April 08, 2012:

I agree, especially now with house prices being low and interest rates being low, now is the best time to buy if you have a steady job. It certainly makes more sense to apply it as an investment for yourself instead of your landlord. Plus you don't have to deal with rent increases every year. You have provided great pointers on how to increase the value of your investment in a home. Voted up. Thanks for the link. Your hub is listed as a related hub on mine - how cool is that!

Victoria Lynn (author) from Arkansas, USA on March 30, 2012:

Thanks, Eddy. Much appreciated!

Eiddwen from Wales on March 30, 2012:

Mmm good pointers here.

Thanks for sharing and take care

Eddy.

Victoria Lynn (author) from Arkansas, USA on March 28, 2012:

random--Thanks for the great input. Sounds like you and your husband have done well. While I haven't signed up with the mortgage company for extra payments to be taken out, I do that on my own. I sometimes pay double on the principal (not lately since I lost my full-time job) and have cut my estimated time to pay off the mortgage way, way down. I want to be debt free and have a free place to live! Thanks again!

Rose Clearfield from Milwaukee, Wisconsin on March 28, 2012:

My husband and I owned our condo during med school and now own our house. We were really glad that we were able to afford this when we moved to Milwaukee. Like Just Ask Susan, we also have a multiple payment per month plan to pay down more quickly. If your mortgage company offers this and you can afford the couple extra payments a year that it includes, it's well worth it. Thanks for all of the great tips and advice!

Victoria Lynn (author) from Arkansas, USA on March 28, 2012:

Vellur--I think that's true most of the time. There might be situations where renting is better for a while, but, overall, I think buying a home is a great investment. Thanks for reading. Good to see you!

Nithya Venkat from Dubai on March 28, 2012:

Buying a home is a much better option. Great hub. Voted up. Shifting and renting adds to more expenses. Owning a home is the best.

Victoria Lynn (author) from Arkansas, USA on March 27, 2012:

eatforcheaper--Wow, that sounds nuts! It's pretty expensive to rent where I live, too. That rental//buy scheme sounds odd. I've never heard of anything like that. Interesting times, huh? Thanks so much for the interesting comments!

Victoria Lynn (author) from Arkansas, USA on March 27, 2012:

Thanks, buddhaanalysis!

eatforcheaper from London on March 27, 2012:

This is a great hub. I agree buying is much more beneficial than renting. In London, England where I live it is crazy expensive! At the moment to rent a one bed apartment in London can be anywhere from £500(about $800) a week close to the city!!! Or a bit further back say 30mins-1 hour from the city by train about £185(about $300) a week!! Most people have to share. They do have part buy/part rental schemes in London now so you buy say 30-80% of the property and build it up each year the more you can afford it. Crazy times! I doubt I'll ever be able to buy boo! But in saying that I wouldn't want to raise a family in the heart of London; probably somewhere on the edge...

Victoria Lynn (author) from Arkansas, USA on March 27, 2012:

I hear ya, Susan! I would hate to go back to renting. Thanks for the input!

buddhaanalysis on March 27, 2012:

very good thoughts an planning.I am agree and thinks alike.

Susan Zutautas from Ontario, Canada on March 27, 2012:

We pay our mortgage bi-weekly which pays off the mortgage faster and lowers the overall interest costs. I would hate to have to go back to renting as it would cost so much more than what we currently pay.

Very useful hub!

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