Why own instead of rent?
Everyone needs a place to live -- you are either going to own that place, or rent it. There are times when it is better to rent, but those times are rare. In general, it is almost always better to own.
Note that I only said it is better to own. I am firmly against people buying a home that they shouldn't buy. I see too many young people buying homes that they really can't afford. I can help you avoid that.
You can buy a good home in the Des Moines market that has a payment equal to or lower than a lot of rental payments. So if you are spending that much per month, why not spend it on your own home, instead of putting money in a landlord's pocket?
(By the way, don't be fooled by some advertisements of "low" mortgage payments. Many times in advertising a home, the advertised loan payment does not include your taxes and insurance. Whenever you consider a loan payment, it should always include those items. Again, I can help you with this, just email me at mike@mikedavishomes.com .)
So if you are spending that much per month, why not spend it on your own home, instead of putting money in a landlord's pocket? Because that is exactly what you are doing. And why does that landlord own that property? Because real estate is the best investment that there is.
Imagine this. Let's say you buy your first home when you are 25. You live in in for about 5 years, and then you buy your next home, the one that you probably want to stay in the rest of your life. In the 5 years that you own your home, it has appreciated (gone up in value). That gives you money to make a nice downpayment on your next home -- your dream home.
OK, so in this scenario, you are now 30 years old. Let's say that you never make an extra payment -- you just pay your mortgage every month when it is due. In 30 years, when you are 60, you own your home free and clear. Even if you don't have a lot of money to retire on, it doesn't matter, because your biggest debt is paid (and if you're smart, all of your other debts are paid as well).
That doesn't even take into account making an extra payment now and then. Did you know that if you make only one extra payment a year, in general you will pay your home off 11 years sooner?
Now imagine that you've rented a house all that time. What benefit did you get? When you're 60, you still have that same rent payment.
All of this is just for starters. In addition to the above, when you make a mortgage payment, you are actually paying 4 different things:
1. Your principal towards what you owe.
2. Your interest on the home loan.
3. Your property taxes.
4. Your home-owner's insurance.
And sometimes, a 5th thing, called private mortgage insurance.
Here's the great news: The interest that you pay on the home is tax-deductible. And now, thanks to a new law, so is the private mortgage insurance.
What does all of this mean? It means that if you add up the fact that your home is going up in value, that you can deduct your interest, you can deduct your PMI (private mortgage insurance) you are actually far better off buying a home than renting.
Questions? Please post them below, or contact me: mike@mikedavishomes.com or 515.259.1078
Cool Link: Try out this neat "Rent vs. Buy" calculator!
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