Thursday, June 23, 2016

Is Renting Really Throwing Your Money Away?

The old phrase about renting is that you are throwing your money away but how come some people that rent have way more money and assets than those that have a mortgage or even own their home?  We recently set out to buy a home because we really wanted something to show for our money every month.  However, as I really thought about it, if we just stay where we are, we will save so much money that in 10 years, we will have the same amount the house cost but in CASH.  Paying on that mortgage for 10 years, we wouldn't even break half-way to having that.  If anything, when I looked at our closing disclosures for the mortgage - we were paying $172,000 in interest over 30 years for that house!  If we just waited 10 years and buy it with cash - we will save ourselves NOT JUST the $172K in interest but the next 20 years in NO payments.

So in all actuality - a mortgage IS throwing your money away technically - like $172,000 away!  You are basically saying that your impulsive got-to-have-it-now American mentality is worth paying $172K + 20 years extra for.  However, can you rent for the amount of time you would need to in order to pay with cash?  That is the hard part.  I want a home while our daughter is with us but if we wait till we have cash, she will probably be married and gone.  Is it worth the extra money thrown away on interest to have it NOW - or is it better to delay it when it will be an absolute blessing and we will have money to spoil our grandkids and then go on trips with our son as he will be a teenager in 10 more years.  Things to think about.  If it is worth it, then you make that decision to go ahead and pay more for 30 years and then have something later - albeit probably an outdated, old home but at least you got something right?

What do you miss out on when you rent?
  1. Property taxes - well you do pay them as they are factored into your rent but you don't have to worry over paying them or setting aside money for them - the landlord does that.
  2. Homeowner's insurance - don't need it when you rent!  You only need to cover your stuff with rental insurance and that is like $15 a month, no biggie!
  3. Home maintenance - You don't have to keep up anything, except maybe mowing and weed-eating.
  4. Home repairs - No worries here for the renter!!  No sleepless nights wondering where the money will come from to fix the broken furnace or water heater or the pest infestation - no worries at all because you simply make a call and tell the landlord to fix it and then you go on and sleep! ;-)
  5. Remodeling/Updating - if you rent long enough, the landlord will update as necessary or you can just live with it the way it is.  If it is really outdated and you can't stand it after 10 years - you can just pick up and move to rent a nicer, newer place.
  6. Septic - don't have to worry about getting that thing pumped or repaired - landlord takes care of that!
  7. Appliances - don't have to ever buy these, as a renter the landlord takes care of them when they go bad or need replacing.  I've actually never bought an appliance other than our washer/dryer - which we bought 10 years ago used from the 80's and they still work great.
  8. Outdoor supplies - no need for a wheelbarrow, yard tools, weed/feed, etc. the landlord takes care of all that and you may have to buy a lawnmower if that isn't something your landlord has done for you, that and gas for the mower but still way cheaper than landscaping the landlord takes care of.
  9. Misc. - everything from association fees to trash and utilities can be taken care of by your landlord.  Ours provides fee TV, though we don't use it, it does allow us to get a huge discount on phone/internet.

Think of the money you don't have to spend on the above things as a renter!  If you do the math, you may end up having more at the end of 30 years than you would have if you had a mortgage - you could have more cash on hand than the amount your home would be worth at the end of 30 years.

The best thing about renting is you can move anytime you want!  You have less stress because all you really worry about is rent increasing every now and then, car issues and life - but no worries about the home, repairs, etc.  You don't need a home maintenance fund!

Are we going to continue renting or find another home to buy?  I'm not sure but this post is a reflection of my thoughts right now - who says you can't rent forever?  If it allows me to travel, buy whatever I want, have a retirement by the time I'm 65 - then why would it be throwing my money away?  I see a lot of family and friends constantly putting money (not to mention TIME) into their homes - money and time they don't have to spend living life.  It has me thinking!

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2 comments:

tealady said...

No I don't think renting is a waste, you brought up a lot of valid points. We have done both, when we bought our first home over 25 years ago we were starting out as a blended family our house was old but we could afford it and still have money left over for savings, church, family fun and an amount to keep us afloat if something came up. Nine years ago we had to sell our home due to the fact I needed a kidney transplant. We had health insurance but it only covers so much, the surgery was $450,000.00 insurance covered 80%. So we sold our home to pay for all the things that had to be paid it's just the way life is. We then rented for 4 years but like you said stuff gets taken care of we now have a mobile home we paid cash for because renting did give us some extra cash each month. Either is a choice we make that is the best for our own family. You know what is best for your family.I wish you the best in your decisions.

Bev said...

That is crazy how much that surgery costs Tealady! Glad you were able to do that and then get your mobile! Buying in our area costs a lot more than renting our mobile but that is because our mobile is very cheap to rent. Normal rent is crazy around here and if we didn't have this deal, we may have to buy to even be able to save money each month but even buying is getting too expensive lately. I'm glad we have this mobile to rent - we might as well stay put until the deal is gone LOL! I'm thinking of ways to make it work for us to fit all the homeschool stuff we are saving for our son and I've come up with some new ideas. I don't see us doing the house thing again - maybe it was good we didn't do it as it was going to cost us $500 more a month plus all the extra housing costs that come with it - who knows maybe God saved us from more than just the bad water and mold - maybe he saved us from a money pit!! ;-)

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