Before I started talking about money, as a pseudo-moneythropologist, I always thought these 3 sentences were solid gold, true.
Now? Not so much.
Myth #1: “Buying a home = Only Building Equity”
This is true to some extent.But if you haven’t paid off the debt on your house, then you are also paying the interest on said debt, which goes against the accumulated equity.
A mortgage is just a debt, gussied up in a pretty, shiny dress full of promises.
The housing market is also fickle.
One day, the house is worth half a million, and the next, $350,000.
So while you may still owe close to half a million on a mortgage, your home isn’t even worth the debt it was bought on.
It isn’t all sunshine and flowers when you own a home.
You do not own the home if you haven’t paid its debt.
The bank can still foreclose on it and close the money it lent you to purchase that home.
Myth #2: “Renting is just throwing money away”
When you buy a home, you have these expenses to shoulder:
- Mortgage
- Utilities
- Taxes
- Fees
- Household appliances (fridge and stove)
- Maintenance Upkeep at 3% a year*
*3% of $100,000 is $3000 a year to be saved.
You may not be spending $3000 a year, but consider this:
A roof doesn’t need maintenance every year, but it costs roughly $10,000 to repair.
That’s approximately 3 years of saving. If you don’t save the 3%, you will just be scrambling on the day that roof needs to be fixed.
When you rent, many things are included, such as taxes, fees, maintenance and in North America, household appliances.
I always try to look for apartments with all-inclusive utilities such as water, electricity and heat and generally speaking I always split 50/50 with BF.
For everything.
Even if I could get a mortgage at $700 a month, I still have to pay for utilities and everything else.
Renting is not throwing your money away, and buying a home is just prepaying your rent for 30+ years.
You can just save what you DON’T pay for, and use it as your emergency fund, or invest it for greater long-run returns.
Plus, if you rent, you get to move any time you want.
Myth #3: “Buying a home is a surefire investment”
I really thought this.
But recently, I’ve read articles and discussed this with my brother, and concluded that houses have a real rate return (which means after inflation) of 0% over the years.
It is only in the once-in-a-blue-moon times after great events (depression, recession, etc) that people have the opportunity to make money on their homes by selling them.
Buying a home is in principle, like investing your money in the stock market.
You cannot be guaranteed that your home will ALWAYS appreciate in value.
And you cannot be guaranteed that your home will always sell for what you paid for it.
Conclusion:
For me, buying a home is great for these reasons:
- You get your own backyard (and BBQ!)
- You have total privacy (no noisy neighbours or yappy dogs!)
- You can decorate however you wish
- You will never have to worry about the landlord selling it
I am not saying buying a home is a bad idea.
I am just saying that if you are going to take on debt for a home (your mortgage), then just be aware of the situation.
There are lots of pros and cons to every situation — renting or buying a home — just be aware of what they are.
Just a girl trying to find a balance between being a Shopaholic and a Saver.
I cleared $60,000 in 18 months earning $65,000 gross/year.
Now I am self-employed, and you can read more about 
I think that the cost of renting versus buying is very dependant on where you live. I live in a small Canadian city and you can still get a decent tiny house here for just under $200,000.
Renting is expensive in my city and the cheap rents are in the rough parts of town. Rent in a nice building for a small apartment with an outdoor parking space can be $800. per month plus utilities. Renting a small house is the same price as paying a mortgage.
My home is the foundation for my retirement savings. I am paying for it now but I will get a lot of it back later. Home maintenance, insurance, property taxes and interest are expenses I will never get back but I am still consider it an inverstment. I have $20,340.00 worth of debt on my HELOC and I have that instead of a traditional mortgage.
When I talk to my friends who own homes, I often hear them complain about having to shell out $$$$$ for various major things like a new roof, broken plumbing, etc. As a renter, I’ll just say that I have a few hair-raising stories of my own, but most of them aren’t financial.
Plus the many expenses people pay for upkeep of the house. Most people don’t factor these kinds of things in when they’re figuring out their rate of return.
We built our ‘dream home’ 5 years ago; my wife designed it. It sits on 17 acres of land. No neighbors, no yapping dogs. When I sit on my front porch drinking coffee in the morning I wouldn’t trade it for any place in the world. A banker might someday foreclose, if the economy ‘tanks’; but no landlord will ever evict me!
Coudln’t agree more. I always hated when people said that renting was throwing money away. It aint’ true. If you’re moving a lot or aren’t ready for hte time committment and maintenance of a house, renting is perfect. When my wife and me bought the house we’re in now, we agreed that htis would be our home until we died. So we didn’t buy it for it’s value or resale value or whatever else, we bought it so that we’d hav ea place to live and die in. And that’s it. The value of the home on the market is meaningless to us because we’ll never sell anyway!
I think if renting is more expensive that buying, you should buy. The way we are going to treat our mortgage is by thinking it’s a rent payment. I’m actually a little scared of buying a house because at our price range we will only afford a fixer upper. Which means we will have to look past the shiny nice things and look at the bones of the house. Luckily, my dad’s an electrician and my father in law likes to renovate.
Buying a home isn’t a bad idea…but I think a lot of folks get caught up in the dream and don’t realize what an investment it really is. There’s a lot of time, money and heartache that goes into the upkeep. Sometimes it means a new roof over a new car…or a new bathroom sink over a new purse! It’s a fickle thing to own!