57 points

On paper, owning a home is almost always more expensive than renting — about 14% more, on average, after factoring in expenses like insurance, taxes, and upkeep.

I’d be interested in seeing how they arrived at the 14% number.

When I bought my first home a couple of decades ago I moved out of my 1 bedroom apartment which I was paying a monthly rent of $700/month into a small starter home with a mortgage of $1000/month. 20 years later that exact same apartment rents for $1350/month. All of the years I lived there my house payment never rose higher than the $1000/month mortgage payment while the rent on the apartment apparently continued to increase year over year. Meanwhile I ended up selling the starter home for $110,000 than my purchase prices nearly 20 years ago.

So is their 14% number just calculated on the first month of each (renting vs buying)?

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31 points

Once you factor in things it mentions like insurance, taxes, upkeep along with others like a down payment then it’s very easy to see where the 14% numbers comes from. Frankly, I’m surprised it’s only 14%. There’s a lot of additional and hidden costs with home ownership.

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3 points

Once you factor in things it mentions like insurance, taxes, upkeep along with others like a down payment then it’s very easy to see where the 14% numbers comes from.

So you’re agreeing with me that they’re only comparing the first month of ownership of the house with the last month of renting? There’s no factoring in the long term rise in rents to their math?

There’s a lot of additional and hidden costs with home ownership.

There certainly are, but its very situational. A 100 year old home will have very different upkeep costs than a 10 year old home. A home in a hurricane zone will have different upkeep than one that isn’t.

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2 points

Did you not read the comment? Property tax, insurance, and upkeep are all perpetual costs. The down-payment, closing fees, and potential mortgage insurance are the only up-front costs.

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3 points

I mean neither of us know how they arrived at the 14% number. So your comparison is not really relevant and I would say it’s not a good one even. But in a generic/average month-to-month overview, home ownership is almost always more expensive.

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45 points
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The difference is those “costs” are going towards buying equity that you then get to keep. Maintaining a house is expensive but it is an asset that maintains value. This article really doesn’t seem to understand that which shows a very basic misunderstanding of the wealth math that goes into home ownership.

Renting may be cheaper month to month but you’re literally pouring that money down a black hole never to be seen in your hands again.

Granted, building equity doesn’t matter when you’re already have no cash paycheck-to-paycheck for either.

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11 points

This is more of a case where the article doesn’t take the time to explain the nuance. Everyone knows home ownership increases equity. Which is why it costs more.

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4 points
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I rent a house for $4600/mo. To buy this same house in the same neighborhood, it would be roughly $1.6m, tho prices are starting to fall a little on these higher cost neighborhoods, so let’s say $1.5m for a deal.

With a 20% down-payment on a 30 year fixed rate loan, it would be close to $10000/mo (including insurance and property taxes).

Also, the lions share of your mortgage goes to paying down interest for the first decade or so.

So let’s say $1k goes to principle per month. You’re still burning twice as much money owning as renting.

The only financial upside is that you may be able to sell for more than you paid. Minus Realtor fees, whatever renovations / maintenance you made over the years, etc.

The current market is insane.

Edit - so I’m not talking in complete generalities, I glanced at the interest/principal ratio. No idea how accurate this is.

After a year of mortgage payments, 31% of your money starts to go toward the principal. You see 45% going toward principal after ten years and 67% going toward principal after year 20.

https://www.americanfinancing.net/mortgage-basics/mortgage-payment-explained

I don’t know what the ratio is in the first year, maybe 100% interest?

So at a monthly payment of $9800, $7864 of which is towards mortgage, that’s $2437 / mo towards principal from years 2-9.

So essentially you’re burning $7363 instead of $4600 for the hope that your house increases in value when you sell it.

Fiscally speaking. There are a lot of other pros and cons to owning.

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20 points

No, not all of them. Insurance, property tax, and maintenance do not go to equity.

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12 points
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Deleted by creator
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3 points

Sounds like you have the fortune of living where these things are cheaper. In Ontario, home insurance is much higher and property tax being less than 1K a year is completely unheard of.

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5 points

These are very region dependant. My state has no income or sales tax, but the property taxes are higher, my 1 acre with a mobile home is basically 3k. It’s almost certainly cheaper than renting, but you can’t just make sweeping statements like that.

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1 point

Only $1k/year in property taxes? I found this really hard to believe, then looked it up to find that Boston has one of the lowest property tax rates in the nation at an average of .49%. Consider yourself lucky I suppose, most of us are paying quite a bit more yearly. If the home you own is in fact a condo, I guess this makes more sense.

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1 point

The property tax on my house is $7000/year… and that is with a fixed assessment from 12 years ago. If I were to buy my house today, my tax would be $21000/year.

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1 point

Less relevant in a condo

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3 points

Replace central air: $8k Deadwood 40+ year old trees: $6k Remove & replace concrete driveway without killing the 80 year old pine who’s roots are buckling it: $8k Remove particle board siding and replace with vinyl: $12k New water heater (+ new requirements for not having a pressure bomb in the house): $3k

Owning a home for three years has been more expensive than renting for a couple decades. Sure the mortgage is $500 a month less then rent, but the loans/credit card + interest for all the above is killing us.

Seriously considering one of the brand new apartments in the up and coming district for only $2k a month if we can sell the money pit with outdated everything!!

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4 points

It’s just talking about the first month / year. Assuming that only inflation is effecting prices to keep things simple the price of renting goes up over time with inflation, while a mortgage stays constant dollar wise, and since a dollar is worth less over time the payment is less.

Combine this with building equity the net cost of owning a home goes down over time while renting goes up. The question is when do those two lines meet, eg. If you bought a home now how long would it take to be paying the same as renting. Maybe it’s 5 years, maybe 10 or 15 depends on the market, judging by the article it seems that period is getting longer as the starting point for a mortgage is really high and will take a while to recover.

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10 points
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For me, I’m in a condo that we bought with a 15-year mortgage during the pandemic. My mortgage (including escrow/taxes and insurance) plus HOA fees is about $2100/month. My old apartment (including monthly pet fee) was more than that when I lived there. It’s currently listed for $2500/month (big complex, not necessarily my unit).

I promise all y’all I’m not spending $400/month on homeowner-specific costs. And, I could reduce my monthly cost by moving to a 30-year mortgage instead of a 15-year mortgage.

Edit: looked up my old apartment again. Holy shit, it’s listed for $2750, which doesn’t include a pet fee.

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19 points

Highly dependent on where one lives I guess. My friend just rented a new apartment and his rent is over double what my mortage payments are. That’s also money he is never getting back where as in my case my house is paid in about 15 years after which I own the damn thing and the monthly mortage payment drops off entirely. Excluding mortage, the montly cost of owning my house is 275€ which includes water and electricity.

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9 points

Excluding mortage, the montly cost of owning my house is 275€ which includes water and electricity.

That’s also excluding regular maintenance or emergency repairs that a landlord would be (often reluctantly) responsible for. It is also possible to do big, expensive, necessary renovations on a house and have it hardly affect the value at all.

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13 points

It is also possible to do big, expensive, necessary renovations on a house and have it hardly affect the value at all.

Isn’t this kind of irrelevant unless you’re a house flipper? If you own a house and make renovations to it, it is because you find some practical value in it.

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1 point

No, increasing the value of your home is one way to get out of PMI payments. And it also helps if you get a reverse mortgage.

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3 points

A house flipper would do everything they can to avoid having to do something like this. It’s primarily a normal home owner who would have to shell out for this.

Ex. when I bought my house, they told me the roof had recently been redone. I didn’t know enough about it, but the pre-inspection didn’t see any issues. Fast forward a year later we have someone look at it because it isn’t looking right in some places. Turns out it’s a very old “torchdown” roof, and by “redone” the previous owners had someone spray it with a silvercoat paint. This is something you do maybe 2-3 times in the life of this kind of roof. The inspector said there were at least 7 layers of paint, the roof itself was way past its recommended lifetime, and if there were any issues it would be impossible to know without taking the whole roof off. They said we could just wait until we have a leak, and then get it replaced, but (given several weather and money factors involved) we chose to go ahead, bite the bullet, and have a new roof installed. This was enormously expensive, but if I were to put the house on the market right after it was done, the state of the roof was already priced in. If someone wanted to pay $X a year ago thinking the roof was already recently “redone”, me getting it actually redone isn’t going to move that needle for anyone. It was purely for my peace of mind as the home owner who wants to continue living here. Sure that has value to me, but no tangible value that I can use to justify the purchase vs renting. I could have rented in this place for well over a year for the price of that roof.

A house flipper would have said “well, let’s try to get rid of this thing before that becomes a problem for us to worry about, shall we?”

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5 points

My mortage payments for one year would cover all maintenance I’ve done to the house during the 8 years I’ve lived here including an entire bathroom remodel. Obviously someone less handy would need to hire someone to do the jobs I’ve done myself so that helps a little with the costs, but still. The maintenance costs for my house aren’t even in the top 5 expenses I have.

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7 points

It’s not about what your mortgage payment is. Interest rates are significantly higher now. See how much the same house costs at the current price and interest rates. Most likely it’s significantly higher now as both rates and prices have increased.

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1 point

My mortage payment is 520€/month including interests which are tied to Euribor12 and change once a year. My interests now are less than they were a year ago.

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1 point

Meanwhile, we’re a third through a 15 year mortgage locked in at 2.5% for the life of the loan. If we had been willing to pay a bit higher in interest, we could have locked in a 30 year mortgage rate, probably around 3%.

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-5 points
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My house is paid for so I’m gonna say nope - even with maintenance and taxes, etc

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9 points

I don’t think your case is what the article describes.

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9 points

By February, I will have put $100k into a house in stuff that’s nearly invisible - replace fence, repair leaking pool equipment, stabilize foundation, repair plumbing, and replace exterior ‘wood’ that was really watelogged mdf. My mom paid $220k 11 years ago. I’ve inherited it - and the $130k mortgage balance. My son is helping me by living there and covering the mortgage payment and I’m pulling money out of retirement to make repairs. It would likely take another $100k to update the 1980s kitchen, bathrooms, electrical, and 20 yr old hvac. Oh yeah, plus $10k/yr in taxes and insurance! Anyone want to buy a house?

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12 points

repair leaking pool equipment

You have a pool. You are already head and shoulders above most people, including people who are also mortgaging a property.

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6 points

It’s green and has been unusable for most of this year. It’s essentially a pond.

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8 points

But you’re building equity! /s

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12 points

Do they mean “buying” instead of “owning”?

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-3 points
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Deleted by creator
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0 points

For me, my apartments was proprietary of the bank till i managed to full repay the loan.

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1 point
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Deleted by creator
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6 points

But having a mortgage does put you on the path to becoming one.

Have a mortgage you pay for long enough, and you’ll end up with ever decreasing payments, then no mortgage, and a house.

Have rent you pay for long enough, and you’ll have ever increasing payments, and never own a cent of the property when you quit.

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