On this episode of “Real Personal Finance,” we’re looking at whether you should buy or rent a home. It’s not as simple as you may think, so dive in to learn more!
We discuss the three main factors to consider when making this important decision:
Affordability – Can you afford to own?
Emotional – How important is it to you to own?
Lifestyle – What implications could ownership have for your lifestyle?
When it comes to affordability, the first thing to look at is the difference in monthly payments between renting and owning. For instance, in San Diego, where Scott lives, the average family home sells for $2 million and rents for around $5,000 a month. Owning comes with more costs than a mortgage alone, like property taxes, insurance, and maintenance. Tune in to hear our estimated monthly cost of ownership (spoiler alert: it’s nearly three times the cost of renting!).
Maintenance alone can be a very difficult cost to predict. You could go months or even years without anything big and then suddenly have an unexpected $70,000 repair. Renting gives you a level of removal from that risk.
That being said, ownership gives you a level of control you just can’t get when you live in a house that belongs to someone else. You can paint the walls, build a deck, cut down trees – you have total control. Plus, there is no risk of getting kicked out someday when your landlord gets tired of renting.
Then there is the question of equity. You’ll often hear people say that renting is like “throwing money away” because you don’t build any equity. While that is true, the interest paid on a home loan can add up considerably. Tune in to hear our example of how a homeowner can make payments for 10 years, pay over $1 million in interest, and only earn $200k in equity during that time.
While it may sound like we are anti-ownership, we both own our homes and we explain why. We discuss all this and much more, including: How much of your income should really go toward a mortgage? How can you determine if buying a home is really important to you? What should you do if you are a heavy traveler? Listen to this short but important discussion to help you weigh the pros and cons of ownership!
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Stone Steps Financial
Money can be confusing—but it doesn’t have to be. When you’re able to understand the complexities, you can make better decisions to improve your daily life. Are you ready to align your money with your ideal life? Connect with us at Stone Steps Financial or Flow Financial Planning.
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