Still Better to Buy a Home

Still Better to Buy a Home  

In areas where the monthly cost of owning is a big premium over the cost of renting, the long-term approach still shows that owning produces a higher lifetime standard of living than renting.

Let's say you bought a house for $150,000 with a 20% down payment and a 30-year mortgage at 6%, it would cost $8,634 a year for the mortgage and about $7,500 a year for taxes, insurance and upkeep (based on 5% of market value).  The total out-of-pocket cost would be $16,134 a year.

Long term, this would put you way ahead of a renter, even though the same house could probably be rented for about $15,000 a year, or $1,250 a month.

The benefit comes from the decline in the real cost of the mortgage.  Even modest inflation will cut the effective cost of the mortgage dramatically over 30 years.  And then the cost disappears.  The renter, meanwhile, faces a lifetime of rising rent bills.

Of course, in real life the actual numbers will differ. But as long as inflation whittles away the purchasing power of the mortgage payment, the odds will favor the homeowner over the renter.

We'd be happy to run the ACTUAL numbers for you to see for sure, but in most cases, inflation will protect us from all but the worst housing markets, if we give it enough time.

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