When It's Cheaper To Rent . . .

Discussion in Mortgage & House Payments started by Denis Hard • Jan 13, 2016.

  1. Denis Hard

    Denis HardWell-Known Member

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    Though it's always preferable to buy a house and not have to pay rent each month, for some people renting can be a lot cheaper than buying a house. The extra money buying a house would have cost them they invest. Should they eventually decide to buy a home their investments would probably earned them enough money to buy a house upfront without taking a loan.

    I believe this can work if one lives in a very cheap apartment . . .

    Don't know if it can work for everyone.
     
  2. gracer

    gracerActive Member

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    I think for some, especially the ones who are earning way below the minimum wage, it is cheaper and more affordable to rent than to buy a house. Think about the taxes one has to pay every year and the estate tax his/her loved ones have to pay once the owner of the house dies. In renting, there's no need to think about all those kinds of payments. As long as you pay your rent on time and the price of renting is reasonably low, I guess it is still cheaper for others. The disadvantage though is that you can never get to take full control of the place you're living in because you don't own it.
     
  3. Onionman

    OnionmanActive Member

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    It's always got to be down to the individual, even the choice of whether buying a property or not. Society may say it is, financial minds might say it is, but if it doesn't resonate with you emotionally and you're the type of person that cherishes your freedom then do what you have to do.

    Obviously, you should run the numbers to make sure that you can live in rented accommodation forever if you so choose, but you've got to do what works best for you.
     
  4. BrandonScooterman

    BrandonScootermanActive Member

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    People often forget the hundreds of extra little things involved in home ownership.
    Things like property taxes and maintenance, insurance, repairs can really add up.
    If you can just afford a house then it might not be a good idea because some repair costs can come up quickly.
    Also the first few years is a lot of interest payments and not a lot of principal repayment.
    The old saying always better to buy isn't the case anymore.
     
  5. Corzhens

    CorzhensWell-Known Member

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    I think it is cheaper to rent if you have the cash in buying a house. First is the location. Like this house that we bought, it is in the suburbs so we spend more time in going to work since our offices are in the city. Second is the cost because sometimes a house is very expensive because of the location and renting becomes cheaper. But in our case, we were renting for 8,000 a month and the house installment is 13,000 a month. So we grabbed the mortgage.
     
  6. explorerx7

    explorerx7Active Member

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    Technically it's never cheaper to rent because that money you are spending could have been contributing to a mortgage, and the longer time you take to purchase a house the higher the price will be. However, there may times when it may be prudent to rent opposed to buying because of convenience.
     
  7. BrandonScooterman

    BrandonScootermanActive Member

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    I disagree.
    First off the first few years of a mortgage (Especially if you have a long amortization period and low down payment) $$ spent goes mostly towards interest and not the principal.
    Home prices are not guaranteed to always increase, remember this little even in the USA around 2008....
    House prices fluctuate based on demand, if people are not buying the prices are not going up.

    If you want to get into things "technically" then "technically" it's never cheaper to buy then to rent! The meaning of the word "cheaper" is to "cost less money." Home ownership always costs more money then renting.

    I get what you are saying, man. Renting is just putting money into someone else pocket instead of building up your own assets.
    BUT I am at an age where I see a lot of people buying houses they cannot afford. They take out these massive loans they can just just barely afford. Then when the foundation starts leaking, or the roof needs fixing, or the furnace stops working, or the property taxes increase, or the interest rate increases, or when one car stops working, or one person gets laid off or 1 of a million things that happen in life happens.. they are really screwed and have to go further into debt.
    This is why almost HALF of the entire USA has ZERO savings! Richest place on earth.... on paper only.
    Many choose to live this way, I choose not too.
    I might not have a nice house, or a nice car and I might eat rice and beans often. I might not do many of the things I see my generation doing. BUT I could lose my job tomorrow and I could have literally every possession in my life gone tomorrow and I would not have to ask a single person for help to take out any loans to get by.
    Much of the "conventional wisdom" like home ownership > renting is complete bologna.
     
  8. Hedonologist

    HedonologistActive Member

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    Cheaper in terms of monthly outgoing, but renting does not raise your wealth. Homeowners are living in their house rent free from day 1. Even though they pay the bank and don't own the home outright until the end, they are still living in the home rent free. Property taxes are factored into rent, as is insurance etc.
     
  9. BrandonScooterman

    BrandonScootermanActive Member

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    I get what you are saying, but that doesn't factor in all the little thing that home ownership requires.
    Renting CAN raise your wealth if you were to invest the money you would be spending as a home owner. Home ownership does not carry compound interest like investments do.
    Your advice is 100% correct if you don't live in an expensive metro area.
    If you want to live in somewhere where you can't buy a house for under a million dollars, renting a room in a house for $500 will be better for wealth creation then trying to finance a million+ dollar mortgage.
     
  10. gata montes

    gata montesActive Member

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    Even though - after having done both in quite a number of different countries and I do much prefer the freedom of owning my own property and have over the years greatly benefited from the sale of quite a number of properties.

    Whether it is or it isn't cheaper to rent than than buy - now largely depends on the country, the city and even the neighborhood you are planning to rent or buy in - along with how long you would be planning to live there, the amount of the down payment, interest rates etc - as although it used to be almost a given - in many countries - that it was always much cheaper to buy your own home rather than rent - this appears to have now reversed - as according to recent calculations based on the average potential home-owner - its more or less the opposite - as it is now generally considered to be cheaper to rent than buy in a large majority of places around the world.

    In fact so much so - that most financial experts now recommend - for those looking to see a significant return on an investment - that you are now likely to get a way, way bigger return - something in the region of almost double - by renting and investing the down payment you would have used to buy house - elsewhere - rather than put that money into buying a property.

    Either way - as buying your own home is a huge decision - it’s important to weigh up the pros and cons of owning first - especially as - not only are there - property taxes, insurance, maintenance and repairs - as well as sometimes - extra home-owner community fees to consider - but more importantly - as you don't own the house you are paying for and are in theory paying rent to the lender - as the property belongs to the mortgage lender - until such time as the mortgage is paid off and that is more often than not somewhere between 25 to 30 years - personal circumstances can change a lot in that time.
     
  11. MrsJones

    MrsJonesActive Member

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    I rented until I purchased a house. I just got tired of being limited to what I could do to 'make it mine.' Yes, I do consider my mortgage payment like paying rent but I get the satisfaction of being able to make changes when I what, have repairs done when I want, and eat beans and rice if I have to :D.
     
  12. jneanz

    jneanzActive Member

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    I believe it depends on the condition of the property and terms of the lease. I've seen some situations where the rent is low because the tenant was responsible for things like paint, carpet or excessive plumbing issues. In my last place, the condition was fair but we found the landlord was lazy. It was his job to maintain the yard but he didn't. The sad thing is that the lease didn't allow tenants to make changes.
     
  13. xTinx

    xTinxWell-Known Member

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    There are rent-to-own options for those who want actual returns on their monthly investments. It seems unfortunate to keep paying for a space you know will never be yours. Also, as already mentioned, you cannot do anything with your living quarters as you please because technically you don't own it. Whereas, if you rent a place with the intention of owning it eventually, you have more leeway to renovate or rearrange its setup anyway you want to, without the land lord/lady nagging at you or levying fines.
     
  14. steph84

    steph84Active Member

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    Renting is totally cheaper because you don't have to deal with upkeep and paying for those expenses out of pocket, but at the end you do not own the place you are living and you can't make modifications. It depends on what you want and need and what you can afford at the time. I do not think that one is better than the other.
     
  15. djdontpay

    djdontpayActive Member

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    Well I played the game for a few years. You know, you complete a professional course, get a nice paying job, try to survive, live on rent, save up, and then some day pay the down payment and move in.

    But, what I noticed was that I wasn't very good at this game. In fact, none of my peers living in the city were... but all these guys who were like driving in or whatever from some place were always flush with cash.

    If you're single:

    So, the first thing I would do is move into a paid for home, like your parents' home or something.
    If because of location or job constraints, you can't do that, the next thing is to move into a shared accomodation. Even if you're making a $100k a year, you should still find roommates. Share all sorts of costs and live like a cheapo, not until you can buy a home, but until you can find someone to settle down with. And then hopefully, your partner will be working or you'll be earning enough to handle the expenses. Get married and rent for as long as you can.

    If you're married:

    Delay having kids until you're very sure about finances. Everything costs a lot when it comes to kids. The next thing is to keep your family in one location while you move around, earning more, traveling or whatever. I had this guy who was a senior product manager at a tech co, but he rented with me and kept his family at his family home. Not the most ideal situtation for a lot of people, but he made it work. A few years later he bought a small place in his hometown. Had he rented a place in the city with his full family, he would never have been able to buy a home. Don't move your family around if you can help it.

    Its cheaper to rent. But, its even cheaper to be a little smart and not pay anything. Share space with people for as long as you can.
     
    #15Apr 4, 2016
    Last edited: Apr 4, 2016
  16. remnant

    remnantActive Member

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    Its preferable to rent when one is living away from home for example in case of work obligations when transport expenses make no economic sense. Its also a good idea to rent when one's financial muscle is not well established and the unit cost of rent is only a fraction of one's income. It also goes without paying that one should rent when in a foreign country or far away from home when buying a piece of land doesn't make sense if of doesn't want to settle permanently. A high net worth individual can also rent in an area with pooled security.
     
  17. Jamille

    JamilleActive Member

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    It's cheaper and more logical to rent if it will mean big savings in transportation cost, travel time, and other miscellaneous expenses. Yeah, the money you pay to the landlord might as well go towards the payment of your own home but that really doesn't happen if you have to pay more for transportation and have less time for your family because your work happen to be located far from your home. I am speaking from experience because I bought a home on mortgage five years ago but since it is located on a suburban village, I have to spend extra on gas and transportation, and pay a monthly homeowner's fee for garbage collection, security, and post lighting. Do I have regrets? Not really. Renting is cheaper right now but houses and lot units continue to appreciate in value over the years and if I didn't buy the home five years ago, I will not be able to afford to buy one now or decades from now.
     
  18. Penny

    PennyActive Member

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    It doesn't really make sense to compare mortgage and rent and just say: what is cheaper. Rent buys you one month of housing, mortgage pays for pert of an asset. What is cheaper: rent or getting a mortgage and paying just the interest? For properties of like value the latter will always be cheaper.

    If you can get a mortgage, the only thing that really makes renting a better deal is if the property market is complete crap--i.e. rates are terrible and the property is depreciating in value. Or if your credit is bad, or you are the kind of person that defaults on payments and so might end up ruining your credit.

    Otherwise, just get a mortgage for a similar amount as your rent. You pay the same but instead of giving it to some stranger your are investing it in an asset.
     
  19. ptahm22

    ptahm22Active Member

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    Rent is obviously expensive according to me. Every year you find that you need to live in a better environment especially when you start having kids. You can't improve your rented residence since you won't live there forever. You may be forced to move to another place which is more expensive but suits your needs. Rented houses are also subject to increase in prices and being forced to move for renovation to take place. You don't have to worry about this if you struggle to get your own house.
     
  20. Alexandoy

    AlexandoyWell-Known Member

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    This is also my belief that it is always cheaper in the long run to buy a house than to rent. Even if you get a mortgage and pay interest but in the end the house is yours. When you rent, the house will never be yours and you get nothing from all the rent you have paid.
     
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