Is Having a Mortgage Better Than Renting?

Frustrations of Renting

For many people, renting can feel frustrating. It's easy to feel frustrated when you're putting a large amount of money into something you'll never own. Then you look at mortgage rates on a home or a condo, and they seem to be just about the same price, if not less than what you're paying in rent. That's where people start to think that buying a home and getting a mortgage would be better because at least they would be paying toward something they would own, right? It seems pretty simple, but it's a bit more complex than this. So is it better to rent or mortgage a home? The appeal of owning a home is, of course, the investment you have as well as the return on your investment as the years go on. For many people, this makes complete sense, especially if you know exactly the type of home you want and where you want to live for a long period of time. However, if you plan to move around a lot for work or because you enjoy getting out and seeing the world, you may want to continue to rent. Each time you buy a house you have to pay closing costs, moving costs, appraisal costs and home inspections which can add up to thousands of dollars. So if you move frequently, the costs of buying a house every few years would really take a toll.

Affordability Considerations

Another thing to think of is can you afford the down payment and the mortgage payments? You need at least 5% down to buy a house, sometimes, even more, depending on your credit score. Then, you have to be able to keep up with your mortgage payments each month without missing one. So if you buy a home that is out of your means, you will struggle to make the payments. Many people think that it's hard to qualify for a mortgage only to find out that it's actually fairly easy. It's the regular monthly payments on the mortgage that are going be the true test of if you can afford your home or not. Another thing that people often think is that their rent amount is equal to what their mortgage payment would be. This is not true in most cases. Your mortgage doesn't include things like property taxes or strata fees, insurance, maintenance and utilities you'll see that owning a home is are usually 40% higher than your mortgage payments. So whatever number you see for your mortgage tack on 40% extra onto that and that's a more realistic amount.

Analyzing Lifestyle and Financial Impact

You can test this out by figuring out what 40% of your rent is currently and then putting that into a savings account for a few months and then seeing how it changes your lifestyle. Most people tend to buy homes that are at the top of their mortgage amount which means that they are usually at the breaking point when it comes to making those payments and living paycheck to paycheck. If you still want a home, go for lower-priced homes or smaller homes and even condos or townhouses which are more affordable. On the other hand, there are many great reasons to buy a home too. Once you've been paying your mortgage for 25 years, you won't have to pay rent anymore, and you'll own your home. But this will only be the case if you don't spend more than you earn. Essentially though, after you pay your mortgage, you will find it easier to live in your retirement. For people who want flexibility, renting would be the way to go, but if you want to invest and you want security and stability, then definitely look into buying. Neither option is better or worse overall, it all just depends on the individual and what they want and can afford.