Friday, November 25, 2011

Mortgage Or Rent?


!±8± Mortgage Or Rent?

For many home buyers, the dilemma of whether to rent or to own is a common one. There are three benefits of home ownership. Firstly, home ownership produces one of the safest and surest opportunities to build your personal wealth assuming that the purchase is geared lightly. Secondly, property offers a potential source of capital preservation. Finally, home ownership yields non-financial benefits that far outweigh monetary returns and provide satisfaction to the owners.

Some people may have the notion that home ownership will no longer produce good financial returns because of the compounding effect of mortgages. However, not everyone has the discipline or skill to put a certain amount of money aside monthly to build up their wealth. The temptation to take out the profits for consumption may be too great to resist.

Maybe buying a home is the best way to commit yourself to save for the initial down payment. Then, by merely waiting until the total needed amount for your dream house is saved, most will end up not being able to fulfill their goals as they may not be disciplined enough to follow strictly their saving plan and also inflation may keep on eroding the purchasing power of money. Conversely, building wealth through home equity has consistently proven to be a prudent strategy as property values are more stable than other asset values.

Concerning the issue of wealth accumulation via home equity, homeowners have to consider if they are better off if they rent and put their extra money into saving. If the returns on other investment instruments are greater than the appreciation of the house prices, then by all means to continue in renting.

However, most homeowners spend less for housing than renters do. Even though the exact cost advantages will differ between towns and cities throughout the country, over time rents continue to increase as mortgage payments remain quite stable.

Moreover, after your mortgage is paid off, your monthly payments will be reduced to zero. This cost advantage of owning means that as the homeowners grow older, they will have more money left from their salaries after paying off the mortgage. Thus, they have more money for other purposes like children education and medical bills.

Aside from the possibility of financial gains, there are many more non-monetary benefits you can enjoy. When you buy your own home, you don't just buy a house, you also gain freedom. You are not only saving money each month and building wealth, but more importantly, you have escaped from the 'renters' jail'. By freeing yourselves from the 'renters' jail', there will be no more landlords to tell you how you can decorate, who you can have over, or whether you can get a cat or dog. For the first time in your life, you are free to do with the home the way you want. Even if the mortgage costs you more, it'd be worth.

Therefore, the financial returns of ownership are great, but the most important benefit of owning is ownership itself. Ownership gives you the feelings of security and comfort. When you rented, you will never felt in control of your life. So, when figuring out your rent versus mortgage comparisons, keep in mind the enhanced benefits of owning.


Mortgage Or Rent?

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