When it comes to owning or renting a house everyone has an opinion, with owning advocates declaring that renting is just throwing money away, and that making a move to own a house is the best way to go about building wealth. Certainly, listening to anything from casual conversations to the television and radio and reading the internet seems to make it clear that is a far better financial move to buy a house than to rent one – but is that really the case?
A renter might spend more than $1,000 per month, with no financial return on that cash. Relocation to your own house is clearly better then, right? Not necessarily, since homeowners spend around $500 a month on things that are not likely to give them any financial return either; these are things such as the insurance, maintenance and property tax. This does not even begin to cover the cost associated with mortgage interest either. Factor in that and the average homeowner is ‘throwing money away’ to the tune of more than $2,000 a month and will not stop wasting more money than a renter, on a 30 year fixed loan, for more than two decades!
Certainly, anyone who wants to build wealth would be much better off putting their money in the stock market than they would buying a house, with housing appreciating at a rate which is not much more than inflation, while stocks have a tendency to return an adjusted-for-inflation rate of between 7% and 10%.