You are paying a mortgage even when renting

Real Estate nest Egg

Are you still trying to avoid paying for a mortgage?  Are you still nervous about owning a home?   Well, the fact of the matter is that unless you are like George Kastanza from TV’s Seinfeld, you are paying for a mortgage – just not your own mortgage, your landlord’s!

So, perhaps it might make sense to consider paying for your own mortgage instead of someone else’s debt to the bank.

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 your mortgage or your landlord’s.

Joint Center for Housing Studies at Harvard University recently reported that:

“Households must consume housing whether they own or rent. Not even accounting for more favorable tax treatment of owning, homeowners pay debt service to 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—as Americans intuit—end up making more financial sense than renting.”

Another difference between buy vs rent is that when you purchase with a 30-year fixed rate mortgage, your ‘housing expense’ is locked in over the thirty years for the most part.  But if you rent, you rent will not remain fixed over the 30 year period and will likely increase over time.