The Truth of Credit

Today I like to talk about “Building Equity” versus “Throwing Away Money”. The latter is a common “myth” about renting; meaning that you will never get the money back that you pay in rent. However, many people forget about the money they throw away in homes, i.e. closing costs, mortgage interest, property taxes, property insurance, private mortgage insurance, maintenance expenses. These costs are the primary reason why most renters cannot afford a home and if you’re considering buying you need to take these costs into account.

In fact, these “throwaway” expenses are more than you’d likely spend on rent. If the only financial advantage of buying a home was building equity, it wouldn’t be enough to offset these expenses, and it would be better to rent. The reason that buying is usually better than renting is not because you avoid throwing money away, it’s because A) You lock in your monthly payment for 15 or 30 years and B) Your house gets more valuable over time.

The TRUTH is that freezing your monthly payments is where the real benefit is. Were it not for this, for many people it would make more sense to rent. This is the gem that makes home-buying worthwhile. This is especially true when you buy a new home and you have little or no maintenance expenses. However, now would be good time to start saving for the inevitable future maintenance expenses (new roof, siding, etc.) because its’ not a matter of if these expenses occur, it’s a matter of when.

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