Money Monday: Renting vs. Owning Pt. 2

Last week I shared a story from our Canadian friends at Young & Free Alberta about the good, bad, and the ugly when it comes to RENTING. Now I'd like to follow up and share another story from Devin Selte on the good, bad, and ugly of OWNING. 

So, here is what Devin had to say on owning:

THE GOOD 

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Owing is probably summed up best by describing it as a sense of accomplishment. It’s a feeling of truly entering into the world of adulthood through home ownership and being responsible for all of the pieces that come with it.

Financially, you now are the proud owner of what’s likely to be an appreciating asset. Over the years, your house should continue to increase in value.  As you make your required mortgage payments, your increased equity in your investment will help accelerate your personal net worth. This could also lead you to using that equity into funding other investments, such as lakefront cabin, or even allow you to finance your own business.  

Plus you can do what you want, when you want. Much like hanging up a sweet poster like this and no one can tell you otherwise.

THE BAD

When it comes to winter, the cold, and the snow, I sadly collect my overused shovel and venture out into the cold and take my aggression out on the poor and defenseless snow.  

This was not an issue when I was a renter.  

Nor was yard maintenance or having to pay for property taxes, utilities like garbage or water, and regular home upkeep. If something broke that wasn’t my fault, I didn’t pay for it, my landlord did.

Owning a house is not cheap. You need to be in tune with your budget and ensure you are saving for a raining day fund for when that crappy washing machine decides it cannot run just one more cycles.

THE UGLY

Much like renting, there is an ugly side to owning.  That ugly is called loan interest.

Most of us do not have the luxury of paying cash for our homes so we have to borrow from to make that happen. There is a cost to do that and it is unavoidable.

Assuming an interest rate of 4% over a 25 year amortization (the total amount of time you have to pay your mortgage back), the table below indicates the amount of interest you would pay be over a specific period of time on various mortgage amounts.

Not pretty, but a necessary evil. 

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THE CONCLUSION

At the end of the day, both renting and owning have their advantages and disadvantages. It really comes down to each person’s preference and where they are currently at in their lives. Early in my career, renting made the most sense as it fit my budget plus allowed me to be easily mobile when new job opportunities arose.  Once I was married, my wife and I wanted a home to grow a family and we had the financial capabilities to do so.

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So there it is, the good, the bad, and the ugly on owning. If you want to compare your options between renting and owning, head over to last week's blog on renting

 

Happy Monday, 

Lauren R.