Now you are comparing apples to oranges. Rent is loss through and through, no argument here. The OP question regards debt. The answer is to wisely manage debt but still get out of debt as soon as you can.
Rom_13:8 Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law.
This is what my response was about. Using debt temporarily but have a plan to get out of it as fast as possible. I stand by my math. The amount of deduction received for mortgage and taxes added up over a 30 year period why paying interest is still far less than the amount of interest you pay if you simply follow the 30 year note route.
Hi alex,
Yes, I understand the OP's question, but when looking for answers to any question we have to be aware of the available options. For example, if I want to take a trip from my home in SC to sunny Miami Fl the available options would be to take I-26 to I-95 straight down to Miami. Or, I could take U.S. 1 through GA and then pick up I-95 in Jacksonville and drive on down to Miami. An available option would not be to drive to Kalamazoo MI and then down through Illinois if my purpose is just to go from my home to Miami.
Similarly, in this discussion, one must be aware of the available options for housing. That is to either rent out a home or apartment or buy a home or condominium. A family of four living in the back of a station wagon really isn't a valid available option. Now, of those two options, which one is the wiser option? In either case you're going to pay someone to let you keep the key to your home. You're either going to pay a landlord forever or you're going to pay a mortgage bank for the duration of a mortgage. Historically, those who go the route of paying interest for the period of a mortgage, come out better than those who pay a landlord forever. In most cases, if you're going to be in a home for awhile, those who opt the mortgage route pay less over 5-10-15 years and will eventually get to the point, such as I am, where all you pay to stay in your home are county taxes, hazard insurance, and repairs.
Some people seem to think that because they are renting that they don't have to pay taxes and insurance and repairs because all they pay is one payment to a landlord. That just isn't true and in most tax districts homeowners get better tax treatment than those living in a business property that is some landlord's rental. But besides that little issue, out of that rent that they pay the landlord, he still pays all the taxes and insurance and repairs for the home that a homeowner has to pay. Ultimately, it is still the person living in the home that pays all taxes, insurance and repair bills for their home.
In most cases, even if a home buyer can't come up with a 20% down payment, they will still, 10 years down the road, be better off financially to have bought their home than to rent. Now, that's in most cases. Yes, there are situations where that doesn't hold true and for those people they need to be aware that renting may, 10 years down the road, have been the best option for them. If you aren't responsible with your credit you'll pay more for your mortgage costs. Those people may be better off renting.
I bought a home from a couple in Miami 30 years ago that had bad credit. They were paying something like 11-13% on their mortgage and their payment on a little $80,000 home was like $1,300/month. I bought that $80,000 home from them and was able to secure financing at 6%, which was good at the time, and the day I took over the home, even though I owed as much money on it as they had initially borrowed, my payment was less than $800/month including escrow. That family would probably have been better off to rent. They were two months behind on their mortgage when I made them an offer and their interest costs were literally eating their finances alive. Then, because their mortgage costs were so high, the rest of their credit bills didn't get paid either.
But, let's face it, they were just completely unwise with their credit which cost them a fortune just because of their bad credit. They had bought the home back when rates had sky rocketed, but because their credit was so bad no lender would refinance them. That just isn't wise.
It has always been my experience, that when matching like for like in housing, you'll pay less with a mortgage and escrow than you will for a rental. In other words, a 1,000sf 2 bedroom apartment will rent for about $850. in my area. But I can buy a 1000sf 2 bedroom condo for about $70,000. A 30 year mortgage at today's 4% would cost you about $334. Add in $300 hundred a month escrow for taxes and insurance and HOA fees and you can live in pretty much exactly the same home for about $650/month if you buy a similar unit.
If you want to rent a nice 3 bedroom home with a yard you'll pay about $1,400 in my area. You can buy nice 3 bedroom homes with yards for $180,000. With no down payment that comes to only $860/month for the mortgage and again add in another $300 a month for taxes and insurance. You likely won't have any HOA fees in a lot of areas where I live. You can buy pretty much the same house that you'd rent for $1150. Now there will be the cost of upcoming repairs, but if you're smart you'll get a home that has a fairly new roof so it'll be at least 20 years before you have that bill to face. In 20 years you won't be paying $1,400/ month for that rental home, but your mortgage costs, if you get a fixed rate mortgage which a strongly advise, will stay constant. So likely, just the cost of the rent increases over 20 years would have cost you as much as your new roof in 20 years.
During the recent downturn in the housing market, home sales prices fell like a rock. Guess what happened to rents? In Miami, where my rental is, they increased because there was so much demand from people who were put out of their 'owned' homes. So, even in the bad times, for those who took care of their credit and were able to buy, that was the best time to buy. Investors were picking up rentals for a song. However, that was a short blip in the housing market and those deals are gone now.
I do completely agree with you that once you have taken the leap into home ownership, then you should work to pay off your mortgage quicker than your 30 year amortization schedule. Most people do. They either sell their home in 5-7 years and pay off the mortgage or they make accelerated payments towards the principle.
God bless,
In Christ, ted