Rent or Buy a home?

More and more convinced that I am a renting kind of guy. Own my apartment now and I havent fixed anything in a decade nor do I want. Sadly I soon have to. I am extremely uninterested in everything domestic and want to think about stuff like that as little as possible. Like the idea of having someone to call if I have a problem and make it their problem instead of mine even if it might lead to me lacking some freedom any probably making a financial loss.

 

I think I would like to buy in a few years time when my financial situation allows it.

Small side note: here in The Netherlands it's really unattractive to pay of your mortgage and completely own your house, so most people pay rent to a housing corporation or mortgage to the bank every month, for their entire lives. If you don't have a mortgage, you need to pay wealth taxes, so it's usually much cheaper to pay a monthly mortgage. When a mortgage is almost done, most people just get a new, smaller mortgage on their house.

I mostly think of buying because of the financial stuff. If you rent a place for 15 years and decide to move, your money will be gone, while if you bought it, you can sell it and get your money back. I don't really know if you will get it all back and make a profit on it, since you will probably get more money for it than for which you bought it (assuming a decent housing market), but because of the devaluation of money, you might actually get less. But it's still at least a part of your investment. And of course there is stuff like interest for the mortgage and you probably invest more into a house you bought than one you rent, but I think it's probably cheaper in the long run (but I really suck at economics and never really looked into it because I was never in the position to buy a house).

And any house of decent size is sold around here. Only small houses and apartments are available for rent.

 

That's really the main reason to own right there. While it's true that you cannot guarantee what the return on your initial investment will be, you'll likely get something for it. Money spent on rent is unrecoverable.

It should be noted that the housing bust was really an unusual circumstance. If you didn't buy during the housing boom though, it's not a big deal to you. I bought my home in 2001, and since that was before the boom, I experienced only a paper gain during the boom, and a paper loss during the bust. It's only the people who purchased during the boom that owe more on their house than they can sell it for. Since I've been there for 9 years now, I certainly can still sell my home for more than I paid for it. So there is a return on the investment I make every month in my mortgage.

The other thing with being there for 9 years is I am paying less on my mortgage than what I would pay if I rented. We have a small house, and when I first took out the mortgage, I was paying a bit more to own than I would if I rented. However, my mortgage is a flat payment every month, while rent prices have risen in the 9 years since.

The only "sunk cost" on owning is the property taxes you pay. For my house it's about $2,000 per year. Needless to say, that is way less than what you'd pay on rent for the year, unless you can somehow find a place to live that costs less than $200 per month. To me, the occassional cost of having to get repairs done to your house is nowhere near the cost of paying rent each month. Even if you sink a few thousand every year in upkeep, and a couple thousand in property taxes, that's still not the cost of rent, and at least you'll get some of that money back if you decide to move.

 

I rent because I don't have enough cash for a deposit on a mortgage. Simple really.

 

Yeah - it's been a huge swing. The banks went from not verifying what your annual income was, to now requiring down payments as much as 20%.

 

Deducting mortgage interest still means you pay the interest, just not tax on the interest. Not a bad savings, but I know people who intentionally take out second mortgages to deduct the interest ... I see no financial advantage in that unless you can receive gains on the amount you borrowed in excess of the interest (which is a gamble).

I'm on my third house now. I prefer to own because I can do whatever I want with the place. I don't need to rely on someone else to fix any problems. Our mortgage is probably 25% higher than we could rent a place for (15 year mortgage). We're currently trying to pay off the mortgage early (hopefully, we'll have no mortgage payment by the end of next year).

 

Financially, owning is the smarter move. But renting can be a lot easier on you, especially if life is chaotic and you don't have time to upkeep a home or just lack the inclination to do so. I own becuase I am tryingto set us up financially. Having 2 kids is a big incentive I have a good friend, who is single, who has rented condo's his whole life. Not because he can't afford a home, he is a 6 figure guy, but because he likes to travel. Upkeeping a hoime would put a damper on that. It's all about your lifestyle. I wouldn't rent a small apartment if I had 3 large dogs for example. I would want a yard.

 

As others have stated, it’s a combination of lifestyle choices and financial considerations.

We bought our house in 1995, which was near the end on a housing downturn. The agent we were using showed us a house that was bigger than we were looking for (and beyond our budget), but the house had been on the market for over a year, and the sellers had moved to another city, so they were motivated to sell. We ended up getting the price down by ~15%, which put it within budget, so we bought it. Now, with the market doing well (unlike the U.S., the housing market here has been strong over the last few years), our house is probably worth 2 - 2½ times what we paid for it. Used houses these days that are a third of the size of ours are selling for what we paid in 1995.

 

I have a bought apartment that I pay rent for, it has been an extremely financially advantageous deal for me. Bought it for 3k€ and it is now worth between 20 and 35k. The problem is that it is a dump, was a dump when I bought it and is a dump now and I just can't be arsed with such things. Probably going to wait until the next spike in hte market, try to sell (possibly taking a bankloan to fix it up while I go on vacation) and just get a rented place.

 

What a lot of people fail to realise is how much they can save by paying off their loan early.
An example : A $200K 30yr loan at 5.75% is about $1170/month. your total payments are a little over $420,000 at the end of your 30 yr loan.
If you pay an extra (roughly)$330/mth(rounding it up to $1500/mth), you pay it off 12 yrs early & save over $100,000 in interest payments.
Bump it to $1700/mth & you pay it off in 14.5 yrs & save almost $125,000 in interest.
Spending only $295,000 for your $200k home is a lot better than $420,000

 

Here in Ireland I don't believe house prices have come down to anywhere near their true level yet so I won't be buying soon.

Besides that, I'm young (ish) and single and amn't tied down to anything. Renting gives me the option to relocate if I look for a new job or if I meet somebody living elsewhere. To me that's the main advantage to renting. If I do feel as though I'm going to settle I will look to buy a house. But for now I've a great apartment close to the city centre and with a great commute.

 

If you bought an apartment, why are you paying rent? Is it like a building fee or something?

I think most people do rent for a while, especially when they are young and single. In fact, most of the time, you don't have a choice - you cannot afford a house, and couldn't get a loan until you land a decent job. (I'm not suggesting your job is bad - I have no idea what it is - just chances are if you're young you're not among the top earners in your profession.)

 

I'd love to be able to buy my own home. Be able to have it how I want and need, not have to answer to ridiculous contractual requirements, not be stuck in a place I can't even make *look* homely because you get fined an awe inspiring amount if the flat doesn't match the photos taken before you move in Then there's all the politicking and demands for when you want to move out made by other agencies and the landlord just so he'll give a reference.

Blagh.

 

Aldeth, around here there are three ways of living, normal rent, buy house with the mortgage or you buy an apartment (or I guess other kinds of housing) but what you really buy is a share of the housing organisation which you pay a monthly fee to, which is usually lower than the rent for a similar apartment but still a substantial amount. In a way it is like a mix between owning and renting. Generally you end up with a mortgage if you want to buy a share as well. Man, it is hard to write about something you aren't completely familiar with in your own language and terms in a different language where I have no idea which terms to use. Wouldn't surprise me if there are similar set ups elsewhere.

 

Practically it works like this. A has a building with four apartments of equal size. A founds a corporation X which has four shares each share representing the four apartments within the building. Then A sell the shares of the corporation to four different buyers who move to their respective apartments. Now A has sold of the building to B,C,D,E and has no longer anything to do with it or corporation X. B,C,D,E continue to pay a monthly fee to the corporation which maintains the building. As shareholders B,C,D,E are free to to decide the amount of the fee. They are also free to sell their shares openly on the market if they wish.

This form of living is quite common in Finland and Sweden and as I understand there are different variations of it around Europe and even in the US. I'm also now describing the Finnish system which may vary from the Swedish system somewhat.

EDIT: Right now common sense in Finland dictates that if you can afford it you should buy and get a mortgage. The interest rates are partly deducted in taxes making it a lot more feasible than long-term renting. Not everyone can afford the luxury of a mortgage though (such as me).

 

I could probably buy an ok house if I moved away from the capital or a bad house or apartment here. One of the guys I grew up with has just bought back home and he'd be earning about the same as me. My point was that he knows he wants to live there for the rest of his life and has a permanent public sector job. I don't know where I'll be working in two years time and so renting makes more sense to keep my options open. Regularly buying and selling a house incurs a lot of hassle and legal fees and such. And of course if prices fall you could be stuck there not able to sell it.