Many renters say they prefer to rent because it is simple and doesn’t carry the stress of home ownership. In truth, they are simply making other people rich.
What if I told you that if you purchased a home, you wouldn’t have to make any monthly payments on it? On top of this, I’d promise you that when the house was sold, you would get to keep all of the equity gain in the home. Sound like a pipe dream? This is exactly what renters are doing for their landlords.
Regardless of how you break down a renting versus homeownership argument, there is one universal fact. If you rent, you are building equity for your landlord. Let’s take a look at a simple example.
Assume you rent a unit in a duplex and pay $1,000 a month for it. Assume further that you live in the unit for three years. During this period, you will have paid your landlord a total of $36,000. You can further assume that your landlord’s mortgage payment was less than $36,000 or he would raise your month payment. The end all effect of this situation is you have paid his mortgage for three years. Think about that for a minute.
Over the three years, you have made every single mortgage payment for your landlord. In doing so, you have helped him build equity in the home through the part of the mortgage payments applied to the principal of the loan. On top of that, the equity growth in the property is entirely his. If you’ve paid off $10,000 in principal and the home has appreciated by 100,000, you’ve just put $110,000 into his pocket. Yep, you’ve been making other people rich.
If you’re renting, you will undoubtedly find the above scenario very depressing. Unfortunately, it gets worse. Go ahead and make a list of your assets and debts. List every single thing you can think of and then subtract the total debts from the total assets. Whatever the number is, would it look better if you had added $110,000 to your balance sheet instead of your landlords?
Renting is a necessity, not an option. You should only rent if you cannot get into a home for some reason. With millions of loan options out there, home ownership should be at the top of your priority list.
With interest rates at the lowest they’ve been in more than 50 years and with home and condo prices in decline for the first time since 1996, many people should view this time as their best chance to buy into an otherwise unaffordable market. It is not a marketplace where one should jump in to flip real estate anymore but a place where you buy a home that you plan to live in for years. “Everyone wants to flip houses and condos like pancakes,” says Greg Stanley, a mortgage broker as quoted in The Star (Toronto). “Maybe we should have a change of view, thinking that a house is actually a home like they did in the old days. Back then, if you bought a house and sold it, it would be the same price. No one expected the houses to go up in value; they only expected to pay them off.”
In a traditional mortgage that is amortized over 25 years, you know that in 25 years you will own the home debt free, with no mortgage. Even if your house did not increase in value one dollar over the next 25 years it would still make sense to buy a home now because you’ll never make another payment for the rest of your life. In twenty five years there will be no mortgage payments to make, and your ‘housing cost’ would be paid for. A renter will only be faced with rising rent costs over time. Rent always goes up, and unlike the happy fellow who pays off in house, a renter will continue to pay rent throughout his retirement. And during retirement, incomes are fixed and much lower than the working years, making a rent payment harder to afford.
With Home n Work mortgages you don’t even have to wait 25 years to pay off a mortgage anymore. With our Smart Equity mortgage software product we can pay off a traditional mortgage 50% faster; so now one can buy a home and pay it off within 12 years. And you can do this without changing your current budget, so with today’s low rates and the expertise of a Home n Work mortgage consultant you should consider buying ‘today’.
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Rebecca joins the team with over 20 years of business, investment and real estate experience. A true advocate for the consumer, Rebecca brings you unparalleled integrity with unbiased advice. Phone anytime and discover for yourself just how easy and enjoyable the mortgage process can be.
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