Removing Road Blocks to Home Ownership – Mortgage vs. Rent

Filed under: Financial Planning

Isn’t that mortgage payment higher than rent? This question is a common topic that I hear when people are looking at options to buy a home for the first time. Today I’m addressing this topic and sticking with the theme of removing roadblocks to homeownership.

Advantages of a Mortgage Instead of Rent

It might seem hard to reconcile a higher mortgage payment when I can save money by renting instead. The reality is that the payment needs to fit your budget. But it’s easier to lose sight of the bigger picture.

It’s important to note that you if plugged into a fixed mortgage, then you are going to have a steady payment for the term of the loan. Keep in mind that your rent isn’t going to stay the same for 30 years. Any time I look at a rent vs. buy scenario, we usually calculate an increase in rent by 4%. Even if we adjust this increase, the numbers always show that mortgages offer better long-term benefits.

Don’t forget that your mortgage payments are working to amortize over time, which means that eventually you will be able to live in the home without a mortgage payment since it’s paid in full. This is the core thinking for all real estate purchases. Look at the long-term plan. There’s almost nothing more powerful in retirement than a home that is free and clear. This strategy takes care of a lot of cash flow issues.

Another noteworthy point is that there are also tax benefits that come from buying a home. You’ll need to work with your accountant for specific details that apply to your situation.

Should You Buy a Home?

Every situation is unique and you need to look at both the short-term and long-term benefits of homeownership. In most cases, there are major financial benefits when you decide to step into the world of owning a home. I’d love to crunch the numbers for your situation. Contact me any time for a personal conversation.

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