To Rent or Mortgage

To Rent or Mortgage Part 1
To Rent or Mortgage Part 2
To Rent or Mortgage Part 3
To Rent or Mortgage (A Third Way) Part 4

I have struggled passionately with this over the last year or so. Getting married, making more money, paying utilities all play into the raging question if I should get a mortgage or if I should just stay renting. It is a long struggle, and for some reason most people that I have talked to seem to have their mind made up on what the best decision is.

Up front mortgaging looks like the best move. You get a nice house right away. You are investing money into yourself instead of a landlord or throwing it into the garbage as some people put it. Houses haven’t really gone down much in value; they usually retain their value more than any other asset you can buy. So purchasing a house isn’t like purchasing a car, because you can resell it usually for what you bought it for. Building equity into yourself has a lot of advantages for the future. You are able to just buy bigger and more things as you get older (that could be selfishly or selflessly depending on who you are).

However, I think there are strong arguments out there for me to just stay renting also. For starters renting is risk free. If the market crashes or if something goes wrong, I haven’t lost anything because my money isn’t in my home. Renting also frees you up to leave quicker and easier, yes you could sell your house if you were mortgaging but nothing beats the ease of just leaving your rental and leaving the problems to the landlords. I don’t have any responsibility for repairs, land tax or resale. These are all things that bring stress into lives and people and bog people down. Rent is significantly cheaper also a month, because I’m not paying land tax, repairs and it’s just a cheaper payment a month, I have a lot more money free per month than I would if I owned a home.

Spiritually speaking, getting a mortgage scares me. Part of me feels like I’m joining the ranks of good intentioned humans out there that are able to get something they can’t afford because we live in the west. I can live in the luxury of something I haven’t yet earned and can live with that debt for 10 years or 25 years. I’ve seen too many people live lives of stress and pain because of their debts and living beyond their means. So by getting a mortgage am I somehow saying that I’m invincible? The temptations to get a bigger house in two years won’t affect me. The temptation to constantly buy bigger things on my house’s equity won’t affect me. How do I know this isn’t just a slippery slope of consumerism and materialism? Something I would be a less prone too if I just rented and lived month to month. I’ve been told to just trust God and get a mortgage. I feel sometimes that it would be trusting God more not to get one and live day to day. Is investing for retirement even a right option? Why am I worrying at 23 for when I am 60? Aren’t we told not to worry about tomorrow let alone in 40 years? Am I being selfish just saving and saving and saving every penny I get for some special day in the future? What happens when kids work into the equation? What if they want to go to school? Is it wrong to want to pay for them to go?

I want to be smart with my money. I want to make an impact and do amazing things with it. I want to be able to use my money to get others out of debt and to help anyone in need whenever I see it. I could have an extra $500 a month sitting around if I rent to do that. Or I could put it all into a home now and in ten years have a heck of a lot more to be able to do that plus the deep pockets to make financial decisions that could bless people in the future. I don’t want to be like those that I have seen that live to pay off their debts, and then live to put money into RRSP’s and then live to spend it after. So honestly, what would you do? Rent or Mortgage? Why? What’s the cons of both to you? Pros?

6 Comments

  • I feel your pain…

    I don’t know what your real estate market is like around you, but I would suggest finding out how much you can afford in a mortgage, and then buying a house that’s half that price, and saving that extra money for helping other people.. Or do a shorter mortgage and therefore paying off the debt sooner, as well as paying less interest overall.

    You could likely buy a house in a “not so nice” neighborhood, and be helping the people around you and saving money to help those who need some help that way..

    I didn’t mention renting, bc i can’t really see a benefit to it. You may not be paying mortgages, taxes and repairs directly, but you are still paying someone else to pay those things for you..

    Just some ideas that I’m sure you’ve thought of, but didn’t mention..

    ta ta,
    James

  • The main question in regards to renting versus mortgaging is what are your needs financially. If you are self-employed and away more than you are home, than arguably renting would be better because you can claim more of the rent than you can of a mortgage payment and it’s easier to walk away from a rental to go on trips because you don’t have to cut grass, shovel snow, etc. But in regards to some of your thoughts as to why renting is better I would argue these:

    First, renting is only marginally less risky ( nothing in life is risk free ), for example your landlord could sell the property and the new landlord has no limitations as to how much they raise the rent ( otherwise a landlord can only raise the rent 6% a year – which is higher than the inflation rate ). Also the landlord could default on his mortgage and the property be sold.

    Secondly, as a tenant you have to give 60 days notice to move. In Sarnia, people are selling homes somtimes before the sign goes up and usually have a 60 – 90 day closing date. Also, saying you’re not responsible for damages isn’t true either. If your landlord performed a pre-spection with you, he can hold you responsible for any damages incurred to his property.

    Thirdly, the cost of owning a home is not necessarily much more than renting. There are lower cost home like condos ( which is what I’m in ) which allow you to not worry about any external costs because they are included on the condo fees. We were in an apartment paying about $550 for rent and insurance and utilities. This was a very small two bedroom apartment. Now we’re in a condo paying about $700 for utilities, land tax, condo fees and mortgage, which has 3 bedrooms, a backyard and a basement.

    Fourthly, paying rent yields no return as you have indentified and planning for tomorrow IS scriptural. Look at Jesus’ example of the talents. The servant who buried his was punished. We should LIVE like Christ will return today and PLAN like he won’t in our lifetime. Planning for tomorrow is not a lack of faith.

    Renting is for life, a mortgage gets paid off and then renting becomes FAR MORE EXPENSIVE. Also, there is far more flexibilty in how you pay your mortgage and it can be redone to adjust to your changing financial situation – something rent cannot do.

    Lastly, no one is going to financially support you when you’re old. The amount provided by Canada Pension is a pittence. Making these arrangements is good stewardship. Buying a house is generally cheaper today than tomorrow.

    To sum it up, buying a home is usually far better when looking at all the factors involved, especially when you calculate over a 60 year period, you will pay FAR more to rent over that time than to own.

  • Lauren and I have talked about how whenever we are in a position to buy a house, we will look for one that has rental abilities [ie. a basement apartment.] That way, you can use that money to put towards your mortgage, as well as be selective about meeting a specific need in terms of who you rent it out too. Depending on mortgage fees and how much you charge, the monthly expenses would be reduced and you wouldn’t be the one losing out on rent money. Plus, you have a dwelling place for people who are really stuck and can offer it to them as a refuge. Not than buying a house is going to happen anytime soon, and I am not too knowledgeable in this area, but it is an idea.

  • Hi Nathan (and Rachel!)

    Rich and I don’t have a house that we own yet, and haven’t done too much investigating yet as we aren’t in a position to buy responsibly yet. I just wanted to throw in a couple things. First, I completely agree with what Dean said about planning for tomorrow and living like Jesus is coming back today. If you did buy, when your mortgage was paid off if you have planned for the future well, you could retire as comfortably as you like and use any income you want to provide for others. I don’t mean buy the extravagant stuff now and plan to give to others down the road, but plan, give, and when you are at the end of your money making road, give more. Easier said than done.

    Also, I read something very interesting recently (can’t remember where) that presented an argument against buying in downtown areas that are maybe a bit “shadier”. There are so many middle class families buying cheap housing in lower class areas they are not helping as much as they think they are, they are actually taking affordable housing away from the lower class families that could otherwise afford to live in a home. Not sure how accurate that is in all cities, but it definitely makes sense to me.

    I hope you find what God wants the two of you to do, and I have no doubt whichever way you go if you are following him he will bless you in many, many ways. Love you both.

  • There are many good reasons to but a house; making money isn’t one of them anymore. It’s very hard to get 10% ROI these days, and I imagine that it’s even harder in a place like Sarnia.

    What’s more is the housing market is bottoming out in the US and it’s going to happen here. Now is the time to get rid of your properties. If you want I can send you some articles on the topic.

    Tom

  • Just want to say that I believe that renting is not throwing money down the drain. Rent can be cheaper than a mortgage payment, homeowners insurance, costly repairs, etc.

    Not saying that you shouldn’t eventually want to own your own home. But don’t see a need for anyone to go out and get a loan for it.

    That is throwing money away. Because of interest, which can rise in some instances. Which is why some homes are being foreclosed on. And not knowing what could happen as far as price of living increases.

    But if you can bare to rent, and rent cheap and save your money in a savings account you could probably buy you a house within 5 to 10 years straight up cash without struggling with a 30 year mortgage.

    For example, if you live somewhere with cheap rent and you can manage to set back just a hundred dollars a week. Which you may be able to do more. In ten years that would be 48,000 dollars plus whatever interest you earn from your bank. Where I’m from I’ve seen nice looking houses go for about 30 some thousand dollars.

    Saving is the best way to to achieve your goals. Not borrowing. Think long term and not short term.

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