People facing the choice between renting an apartment or purchasing a house will find themselves the recipients of much information designed to persuade them that purchasing the house is the more logical alternative.
A little digging into this information, however, will reveal that its source is from people who have a vested interest and stand to make a profit from influencing the decision in favor of purchasing rather than renting.
Banks, mortgage companies, mortgage brokers, realtors, insurance agents and title companies are a few of the many that benefit whenever a place to live is bought.
These vested interests are responsible for the existence of many myths and misinformation regarding the choice to rent in lieu of buying.
Let’s examine some of those myths, attempt to dispel them and supply some level of objectivity to the decision making process.
While it may be true that many Americans desire to own a home, claiming that it is The American Dream is hyperbole in the first degree. This one almost seems to be implying that not wanting to own a home is unpatriotic. The fact is that no one, however much they may want to claim to have their finger on the pulse of some idealistic expectation, cannot account for the diversity that is represented by millions of people that are able to use their own self determination to define their dreams. Some people dream of owning a business. Others want to pursue advanced education. Others want to travel the world freely and experience the variety of different people and cultures. These are also worthwhile dreams, dreams that could be inhibited by the responsibility of home ownership.
This one has been repeated so often, that is it is accepted as truth without any critical thinking being applied to it at all.
Those who advocate purchasing a home go to considerable lengths to make the argument that a mortgage payment is an investment that is guaranteed to appreciate in value, while at the same time maintaining that rent is a complete waste of money.
Try telling that one to anyone in the past several years who has plunked down $30-$60,000 as a down payment on a $300,000 house and is now dealing with a $240-$270,000 mortgage, needs to move and sell the house, and is told that based on comparable sales in the area, the house is only worth $200,000. The reality is that this person is staring right down the barrel of a loss of their down payment and whatever it takes to cover the negative equity on the sale of the home.
Even in times when home values are appreciating, the simple fact is that anyone who either wants or needs to sell a home during the first five years of ownership is going to break even at best. That’s because mortgage interest is front-loaded, and settlement fees on the initial purchase also contribute to the deficit.
The main element of this myth that must be discredited is the idea that buying a home is an investment. If it is being purchased as a primary residence, it is not investment, it is a place to live.
There are numerous mortgage calculators that propose to demonstrate that the mortgage payment on a purchased home will be less than the rent on a similarly sized apartment.
Most of these are completely incapable of accounting for some of the variable costs of home ownership, with property taxes and mortgage insurance required for down payments of less than 20%, being two that at best, can only be approximated.
Then, there is the cost of utilities to consider. While some rental properties do leave some or all utility costs as the responsibility of the tenant, all homeowners always pay all utilities. When you factor in that most single-family housing has four exterior walls exposed to the environment, you can be relatively certain that heating and cooling costs will be elevated compared to many apartments that have only one or two exposed walls.
These are just three of the many myths that attempt to make home ownership more attractive than renting. There are others, including the claim that people who live in an apartment do so out of necessity, when in fact for many it is a deliberate choice. It is also sometimes claimed that rental housing experiences a higher crime rate, a claim, that under close scrutiny, falls apart.
The freedom to move easily, invest savings in more liquid investments as opposed to tying them up in a huge down payment, and the freedom from routine and unexpected maintenance costs, are just a few of the reasons why renting will always be a valid choice for those who take the time to weigh their options logically.