Cheaper to rent than buy a house?

[Asmodean]

Originally posted by Ming
and the equity you build up make buying a much better option than renting... which is the equilivent of throwing money down a black hole.

Exactly. The equity is in my oppinion the first and foremost advantage of buying property. Without it the the wealth that many people spend a lifetime aquiring would be washed down the toilet, so to speak.

Asmodean

[Ming]

It's almost like a forced savings plan. Granted, there is interest and taxes, but you still end up with equity in a property vs nothing for renting.

[reds4ever]

Originally posted by Ming
It's almost like a forced savings plan. Granted, there is interest and taxes, but you still end up with equity in a property vs nothing for renting.

Thats how I view it, I'm hopeless at long term saving but I pay £350 a month off my house, it's likea 20 year savings policy!

[Az]

Ming: You could, OTOH, pay the rent and invest the rest that you would've paid to the mortgage. you could get some nice equity on that , too. ( FF 25 years )

[Flubber]

Originally posted by Ming
It's almost like a forced savings plan. Granted, there is interest and taxes, but you still end up with equity in a property vs nothing for renting.

I agree but I think the argument in favor of renting usually asssumes that you invest/save (or at least have the benefit of ) any monies when mortgage payment plus other costs exceed rental costs.

In circumstances where monthly ownership costs and monthly rental costs are very similar, ownership always wins since some equity is better than a nothing. When I llok at my mortgage payment and see that about 300 dollars of each payment is equity, I see I am accomplishing something

[reds4ever]

Originally posted by Azazel
Ming: You could, OTOH, pay the rent and invest the rest that you would've paid to the mortgage. you could get some nice equity on that , too. ( FF 25 years )

It's no dearer to buy than to rent in the UK, so you may as well get something for your money.

[Ming]

Originally posted by Azazel
Ming: You could, OTOH, pay the rent and invest the rest that you would've paid to the mortgage. you could get some nice equity on that , too. ( FF 25 years )

True enough... but you would have to also figure in the money you save on taxes. In the US, the tax structure is set up to favor those paying interest on mortgages.
It is a BIG savings if you are in a high tax bracket.

In addition, part of the advantage of home ownership is the fact that the property appreciates in value, making it even a better investment. Granted, the original post kind of down plays that... but until the bottom falls out of the housing market, there is also big money to be made. My house has appreciated in value over 22% in four years... So I look at the story with a grain of salt, and I'm happy I don't live in SF

[Lawrence of Arabia]

this report doesnst take into account the money you can make when selling a house after 7 years. it might be cheaper by $15,000 to rent, but when housing values go up, you can easily cover that $15,000.

[Az]

In Israel, there is a direct subsidy in interest rates, so it's basically the same, just not favoring the rich. ( Also making for far easier long-term calculation )


Basically, the question should be comparing the price of the flat at the end of the mortgage, and then take the mortgage payments, substract rent for a similar appartment, and calculate what would an investment plan with a certain ( educated guesswork ) return make ( don't forget inflation and tax breaks in calculations).

If the house purchase is better ( doubtful ), BUY.

if otherwise, just look at the differences in returns, and wonder, is the warm and fuzzy feeling of home ownership worth it.

Also, a very important aspect is the liquidity of your assets. Your portfolio might vary in liquidity, but there is one thing certain in homes: they aren't liquid.

[Ming]

Originally posted by Azazel
If the house purchase is better ( doubtful ), BUY.

In almost every case here in the states... for an equilivent size house/apartment, purchase would be the better deal. Now granted, I don't live in SF or NY

[Dauphin]

The only reason I would consider renting is if I needed a quick place to tied me over whilst moving a significant distance to a new job. The only benefit I see in renting is the short term convenience.

There are of course risks to owning a home with a mortgage.

[Az]

In almost every case here in the states... for an equilivent size house/apartment, purchase would be the better deal. Now granted, I don't live in SF or NY

Include liquidity of asset, and the numbers are often sobering.

[rah]

Right now, I would have to say my house is a liquid asset. For the last 6 months to a year, the average length of time a house in our neighborhood is on the market is less than 4 days. No matter how ridiculous the asking price.

[Flubber]

Originally posted by Azazel

Include liquidity of asset, and the numbers are often sobering.

What is sobering?? In Calgary, the cost to rent is comparable to what my mortgage payment would be for a comparable home.

Add in "costs of ownership" and owning costs a little bit more but not much. Barring a housing crash which COULD result in my owing more than my asset is worth, I don't see the advantage of renting

[Az]

What is sobering?? In Calgary, the cost to rent is comparable to what my mortgage payment would be for a comparable home.

This isn't the case in most places. Not in the old world, at least, from what I know.