Rent Is a Housing Expense. A Mortgage Can Also Build Equity.

Every month, you are going to pay for a place to live. The question is: where is that money going, and what could it be doing for your future?

Renting absolutely has its place. It can provide flexibility, fewer maintenance responsibilities, and the ability to move more easily. But for people who plan to remain in the same area for several years, it may be worth comparing the long-term cost of renting with the potential benefits of homeownership.

Rent Pays for Housing — But You Don't Own the Asset

When you rent, your monthly payment provides something important: a roof over your head. But when the lease ends, you generally don't have an ownership interest in the property.

Your landlord owns the home and receives the potential benefits of ownership, including appreciation and the equity created as the mortgage balance is reduced.

That doesn't automatically make renting a bad decision. It simply means rent should be viewed primarily as a housing expense rather than an investment in the property.

A Mortgage Payment Can Do More Than Provide Housing

Homeownership is different because part of your mortgage payment may go toward reducing the principal balance of your loan.

As that balance decreases, you can build equity.

Equity can also increase if the property's market value rises over time. Of course, appreciation is never guaranteed, and home values can decline. But over a longer ownership period, a homeowner has the opportunity to build an asset that a renter generally does not.

That is one of the biggest differences between renting and owning:

Both provide you with a place to live. One may also help you build wealth over time.

Don't Compare Rent to Just the Mortgage Payment

This is where homeownership discussions sometimes become misleading.

Owning a home involves more than principal and interest. Buyers should consider the entire cost, including property taxes, homeowners insurance, mortgage insurance when applicable, HOA fees, utilities, repairs, and ongoing maintenance.

There are also upfront expenses associated with purchasing a home.

So the question isn't simply:

"Is the mortgage payment cheaper than my rent?"

A much better question is:

"What is my total cost of owning compared with renting, and where could I be financially five or ten years from now under each option?"

You May Not Need the Down Payment You Think You Do

One reason renters sometimes don't investigate buying is the belief that they need 20% down.

That isn't necessarily true.

Depending upon the buyer and property, conventional, FHA, VA and other financing programs may offer significantly lower down-payment options. There may also be down-payment or closing-cost assistance programs available to qualified buyers.

The important word is qualified. There isn't one loan program that's right for everybody, which is why talking with a knowledgeable lender before assuming you can't buy can be worthwhile.

Sometimes Renting IS the Better Decision

I'm a Realtor, but I'm not going to tell you that everybody should own a home.

If you're likely to move soon, your employment situation is uncertain, you don't have adequate reserves, or homeownership would stretch your finances too far, renting may be the smarter choice.

Buying a home simply because someone tells you that you're "throwing money away on rent" isn't a good reason to buy.

Homeownership should make sense for your finances, your lifestyle, and your plans.

Find Out What the Numbers Actually Say

If you've been renting for several years, don't assume buying is better — and don't assume you can't afford it.

Run the numbers.

Compare what you're paying now with what homeownership could realistically cost. Look at the upfront expenses, monthly payment, maintenance responsibilities, expected length of ownership, and the potential equity you could build.

Then make the decision based on facts instead of slogans.

If you're renting in the Tucson area and wondering whether purchasing a home makes financial sense for you, I'd be happy to help you look at the housing side of the equation and connect you with a lender who can explain the financing options available to you.

Wes Stolsek, REALTOR®

OMNI Homes International

520-404-9773

www.wesleystolsek.com

Financing programs, rates, qualification requirements, property values and potential appreciation vary. Homeownership involves costs and risks, and appreciation or equity growth is not guaranteed.