There is a minor trend today among young people of home buying age and means to rent instead of buy. They seem to be opting for the freedom to leap to the next thing, the next location without the encumbrance of a home and mortgage. This new 'rootlessness' has been a boon to landlords who have obliged by boosting rents to remarkable levels. Many contemporary renters actually could be paying less in mortgage payment for a comparable property than they are now paying in rent.
But here's the thing: whether you buy or rent, you are paying down somebody's mortgage. Either you are paying down your own and receiving all the benefits that accrue to those who do, or you are paying down your landlord's mortgage and letting him have all the benefits.
From the Joint Center for Housing Studies at Harvard University:
“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.”
So trading in your rent payment for a house payment that offers significant tax advantages and superior potential for appreciation and wealth building makes sense. But what about that footloose-and-fancy-free, move-at-a- moment's-notice ideal? I'm sure renting represents this type of Freedom to some, but to get to the heart of things: what, exactly is Freedom? Isn't it the ability to do what you want to do when you want to do it? That takes resources. It takes assets and (dare I say it?) it takes wealth. We Americans have traditionally built wealth with real estate. We start with our personal residences (we buy them and let them appreciate) and sometimes add a rental property or two.
So, Mr. or Ms. Footloose-and-Fancy-Free renter: why not buy that home now (while you still can*), and when you want to go and do, rent it. Let somebody else pay your mortgage! The house will continue grow in value, produce great tax advantages, and increase your net worth. Then, when you are ready to land in another place for a time, buy another house, and another, and another. If you adopt this strategy early and pursue it for a dozen years or so, you may be financially independent by the time you are 40! And wouldn't that be nice!
Of course, the team at GreatNest is well versed and dedicated to helping you navigate this process. We are happy to discuss it with you, help you sort out your financial picture and your goals, and then help you move forward in achieving them. It starts with phone call to: (336) 790-5210.
*And, by the way: that 'while you still can' comment above is not a scare tactic. It's real. Since the real estate downturn a few years back, the market has rebounded. Today we have two significant trends happening with no end in sight. Prices are rising. In the Piedmont Triad area, the increase can be as great as 5% a year! AND, interest rates are rising too. The payment you might get on a 30 year fixed mortgage today is higher than it would have been on the same mortgage a year ago because rates have gone up. Put these two trends together and the house you can afford today may be out of reach for you next year. Seriously: if there was ever a time to get started, it is NOW.