Renting Scares Me: Why I Chose to Buy a Home Instead

Edward Matthews

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One of the trendiest topics, especially amongst millennials in the financial advice community, is that it is better to rent a home rather than to buy.

I see this a bit differently.

Nothing makes me want to vomit more than the idea of renting a home.

Like a typical college student, I rented throughout college. After college, I moved in with my girlfriend, and we rented again for 5–6 years. Renting worked for us; we hadn’t settled into our careers, we wanted to explore living in different places, and we didn’t have enough for a down payment. Renting worked.

Until it didn’t.

After our 3 straight years of having our rent jacked up in two different places, we realized, after doing the math, that the monthly mortgage on a home in our area was marginally more expensive than what we were paying in rent. We were paying $1,500 in rent each month, and after a 5% down payment and FHA loan, we were able to buy a home with a monthly payment of $1,750.

After just one year, the housing market pushed the value of our home to a point where we were able to refinance out of the FHA loan and into a conventional loan, getting rid of the primary mortgage insurance, or PMI. This lowered our monthly payment another hundred bucks or so to $1,650.

Only $150 more per month than renting, and we had a yard, more space, and we could paint the walls if we wanted. Not bad! Having control over the space that you live in is a major upside to homeownership, but other things made homeownership attractive to us as well.

Stability

Having fixed costs that you can predict over a long period of time is a huge benefit of homeownership. When you take out a mortgage with a fixed rate, your monthly cost is essentially locked in for the life of the loan, whether that be for 15 or 30 years.

So in 20 years, I will still be paying around $1,650 or so, depending on taxes and insurance. There will be surprises and expenses, to be sure; however, having a well-stocked savings account can handle most of these. If not, you always have the option to refinance or take out a HELOC.

Fluctuations in the rental market

When you rent, you have no guarantee that your rent will stay stable, especially if you are in a hot and desirable market. Take my hometown, Denver, Colorado, for example. Rent has increased in Denver from a median of $971 back in 2005 to $1,463 in 2019, representing a 33% increase.

In fact, the national average for rent increases in the last decade is 36%. In hip places like Los Angeles, that number is even higher at 65%, where the median rent clocked in at $2,527. That means that if you started renting in 2010 in L.A., it is likely that you were now paying two-thirds more in 2019.

While renters have been paying more, homeowners have been growing in value. Over the same period of time, home values in Los Angeles increased by 96%, meaning that if you bought a home in 2010, it, on average, would be worth double what you paid for it in 2019. That is about 10% growth each year for the last decade, and there is no sign of stopping. All of this while paying the same monthly mortgage payment that they have been since the beginning.

The big question is, how much will rent be for your apartment in your neighborhood in 20 years or more? Will you still be able to afford it?

Your lease is up

Relocating is easy when you are young. However, as you get older, it becomes more and more difficult. It is especially hard with and on, kids. There are many reasons why a person or family moves out of an apartment; sometimes the rent is raised and is too expensive; other times, the landlord simply wants to sell the property and move on. In both cases, it's time to move.

This is really what scares me about renting—the constant moving. For me, stability as a family is very important. My wife and I have two children, and we would love for them to stay in the same area, make friends, find their place in school, and be happy.

It can be hard to do this when you are renting. You may not be able to find a place in the same neighborhood, or you may not be able to afford it.

You can make money

One of the perks of homeownership is that your home could increase in value over time. We bought our home 5 years ago for $315,000; it is now valued at over $515,000, a whopping 38% increase or around 7.7% a year. That is pretty awesome.

Could it go down? Sure. Did I get lucky? Probably. Is growth like this even possible while renting? No.

Renting provides you zero opportunity for financial growth, especially in my case where rent was only $150 less per month than ownership. It would take me over 100 years to save the same amount in rent that I earned in equity in just 5 years.

Do I have access to this money? Is it liquid? Not exactly. But it is there if I need it or want it. I always have the option to pull the trigger, sell the house, and use that money for medical bills, vacations, as part of a mid-life crisis, to start a brewery, or whatever.

If I move, this equity moves with me. If I was so inclined, we could sell our home and use the cash to pay outright for a cheaper property somewhere else. Now, we won’t do this, we have kids, and we love our town, but if we needed to, we could literally live rent-free within weeks. Renting, generally, does not afford you this luxury.

Mortgage payments have an end date

This is one of my favorites parts about a mortgage. It has an end date.

As a homeowner, once your home loan is paid off, you will only really be required to pay taxes. That's it. You can get insurance if you want to, but it isn’t required. That means that for the first time in your life, you will be living rent-free.

This is especially attractive when you consider the fact that as we age, our ability to make money generally diminishes, as does our desire and motivation to do so. Your cost of living, post-mortgage, goes down dramatically.

Renter’s do not have this benefit, meaning even if you are 90 years old and living on a fixed income, you still will be paying rent, rain-or-shine, month-in, and month-out. This isn’t necessarily bad, but it is something to take into consideration when planning your future.

Another way to think about it is this; my home will be paid off when I am 58 if I make no extra payments. With a little luck, I will live to see 80; this means that my entire retirement check can go to whatever I want for 22 years or more. All without having to pay significantly more, and perhaps even paying less, per month for my shelter when compared with renting.

The best part is that when I die and my wife dies, our kids will get the house, paid in full, to live in or sell, creating generational wealth for my family. Again, I say that this works for me because renting is not significantly cheaper than homeownership where I live.

When does renting make sense?

Homeownership is not for everyone, there are many situations where renting might make more sense, including:

  • If you move a lot.
  • If rentals in your area are significantly cheaper than a mortgage payment (with comparable properties, of course).
  • If homes in the area are very old and might need a lot of renovations.
  • If homes are significantly overvalued.

Your situation is unique, and you should consider all of your options before making a decision. However, if you are young and have the ability, I believe that homeownership is a great way to go; it gives you stability, it is an asset, and it allows you to live rent-free when you are old.

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My mission is to provide a unique viewpoint on the world and local events. I will be providing you with up-to-date news and insights from Colorado specifically in the Denver area. I also enjoy writing articles on education, writing, and other niche topics.

Arvada, CO
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