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The Real Stuff: 5 reasons it’s smarter to buy than rent #5

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5 reasons it’s smarter to buy than rent #5

Build your wealth, not your landlord’s:  There are two other reasons why it can be smarter to purchase than to rent. When you purchase, you lock in a payment at today’s interest rate.  Assuming that there is inflation at the average rate of 2.54 percent per year (the U.S. average), 10 years from now your monthly payment will be the equivalent of 75 cents on the dollar.  In other words, a $2,000 payment 10 years from now would be the equivalent of $1,500 in today’s dollars. In 20 years, it would be the equivalent of $1,000 in today’s dollars.  In contrast, renters may continue to receive rent increases.

An additional benefit of homeownership: each month you pay your mortgage, you accumulate equity. In contrast, renters are paying down their landlord’s mortgage, allowing the landlord to accumulate the wealth rather than them. Thus, in the long term, for some individuals it’s almost always smarter to buy rather than rent.

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By: on April 30th, 2012 Category: Uncategorized