Stop Paying Your Landlord’s Mortgage!

By
Real Estate Broker/Owner with Real Pros

Stop Paying Your Landlord's Mortgage | Keeping Current Matters

There are some people that have not purchased a home because they are uncomfortable taking on the obligation of a mortgage. Everyone should realize that, unless you are living with your parents rent free, you are paying a mortgage - either your mortgage or your landlord’s.

As The Joint Center for Housing Studies at Harvard University explains:

“Households must consume housing whether they own or rent. Not even accounting for more favorable tax treatment of owning, homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord plus a rate of return.  

That’s yet another reason owning often does—as Americans intuit—end up making more financial sense than renting.”

Christina Boyle, a Senior Vice President, Head of Single-Family Sales & Relationship Management at Freddie Mac, explains another benefit of securing a mortgage vs. paying rent:

“With a 30-year fixed rate mortgage, you’ll have the certainty & stability of knowing what your mortgage payment will be for the next 30 years – unlike rents which will continue to rise over the next three decades.”

As an owner, your mortgage payment is a form of ‘forced savings’ which allows you to have equity in your home that you can tap into later in life. As a renter, you guarantee the landlord is the person with that equity.

The graph below shows the widening gap in net worth between a homeowner and a renter:

Increasing Gap in Family Wealth | Keeping Current Matters

Bottom Line

Whether you are looking for a primary residence for the first time or are considering a vacation home on the shore, owning might make more sense than renting since home values and interest rates are projected to climb.

 

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Rainmaker
560,247
Ken's Home Team LLC. | 360.609.0226 | Portland, OR & Vancouver, WA Real Estate Team
Ken's Home Team LLC. - Vancouver, WA
- SOLD IS OUR FAVORITE 4 LETTER WORD -

Great post, I keep telling friends to stop the renting, stop making other people rich and let me help them making them rich

Jul 25, 2015 11:48 AM #1
Ambassador
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Tammy Lankford,
Lane Realty Eatonton, GA Lake Sinclair, Milledgeville, 706-485-9668 - Eatonton, GA
Broker GA Lake Sinclair/Eatonton/Milledgeville

Some folks are meant to be renters in my opinion.  I think the belief that EVERYONE can/should buy got us into a lot of trouble. I think every first time buyer should have to save 20% down.

Jul 25, 2015 12:55 PM #2
Ambassador
1,338,963
Charles Buell
Charles Buell Inspections Inc. - Seattle, WA
Seattle Home Inspector

It is the ongoing maintenace that most first time home buyers do not adequately grasp.  The next thing you know their equity has rotted away.

Jul 25, 2015 01:37 PM #3
Ambassador
2,011,382
Christine Donovan
Donovan Blatt Realty - Costa Mesa, CA
Broker/Attorney 714-319-9751 DRE01267479 - Costa M

Sirous - These are important numbers for renters to consider as they decide whether to keep renting.

Jul 25, 2015 04:22 PM #4
Rainmaker
782,092
Olga Simoncelli
Veritas Prime, LLC dba Veritas Prime Real Estate - New Fairfield, CT
CONSULTANT, Real Estate Services & Risk Management

 Sirous - of course the presumption in wealth building via ownership is appreciation in home values, which may not always be the case. With easy money (i.e. low credit scores) and nearly nothing down, "home-owners" lived in their homes paying low-interest mortgages (yes, another word for rent), then simply walked away when the market turned as they had not equity in the home and none had built up.  With relaxed credit terms, I am afraid we are heading in that direction yet once again.

Jul 25, 2015 09:37 PM #5
Rainmaker
2,571,423
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

The message is clear.....Its been a while since I heard it put the way of your title Sirous M . Jafari 

Jul 25, 2015 11:23 PM #6
Rainmaker
1,944,005
Michael J. Perry
KW Elite - Lancaster, PA
Lancaster, PA Relo Specialist

Dear tennants , don't forget to make my mortgage payment this month .

Jul 25, 2015 11:34 PM #7
Rainer
333,702
Frank Castaldini
Compass - San Francisco, CA
Realtor - Homes for Sale in San Francisco

Clean and to the point why owning is financially hand down the right thing to do.   I like saying "love your tenants they are paying your mortgage."

Jul 25, 2015 11:42 PM #8
Rainer
408,011
Thomas F. Scanlon
Borgida & Company P. C., CPA's - Manchester, CT
CPA, CFP

Sirous M . Jafari - Well done. Buying a home means making a commitment. I have rented, owned, rented and now own again. I so prefer owning my home.

Cheers,

Tom

Jul 25, 2015 11:43 PM #9
Rainmaker
699,027
Chris and Dick Dovorany
Homes for Sale in Naples, Bonita Springs and Estero, Florida - Naples, FL
Broker/Associate at Premiere Plus Realty

I agree with Tammy.  I believe 1st time buyers need to have a little restraint to be able to have the maturity to save for their downpayment.  There's more to buying a home than the mortgage payment especially for 1st time buyers who might have to go with an older property.

Jul 26, 2015 12:05 AM #10
Rainer
10,921
Dori Thurmond
RE/MAX Advantage - Portage, MI

This is simple enough for anyone to understand. Very well written. 

Jul 26, 2015 12:21 AM #11
Rainmaker
1,139,679
Margaret Goss
Baird & Warner Real Estate - Winnetka, IL
Chicago's North Shore & Winnetka Real Estate

As they say, a picture is worth a thousand words, and in this case, your graph does just that.

Jul 26, 2015 03:20 AM #12
Rainmaker
1,022,906
Jan Green
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

All great reasons why renters should be buyers!  Prices are rising, interest rates are expected to rise and it makes much financial sense to buy your own home vs. paying someone else's mortgage!

Jul 26, 2015 04:36 AM #13
Ambassador
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1~Judi Barrett
Integrity Real Estate Services 118 SE AVE N, Idabel, OK 74745 - Idabel, OK
BS Ed, Integrity Real Estate Services -IDABEL OK

Pay the landlords' mortgage or pay your own.. you have to live somewhere and it's going to cost money either way.. 

Jul 26, 2015 08:13 AM #14
Ambassador
1,557,292
Karen Fiddler, Broker/Owner
Karen Parsons-Fiddler, Broker 949-510-2395 - Mission Viejo, CA
Orange County & Lake Arrowhead, CA (949)510-2395

It's so important to get into the home ownership market as soon as you can. It's a huge part of a financial plan.

Jul 26, 2015 11:18 AM #19
Rainmaker
1,855,050
Lise Howe
Keller Williams Capital Properties - Washington, DC
Assoc. Broker in DC, MD, VA and attorney in DC

I am so sorry that you got slammed with these nonsense comments. Great post and worth sharing with buyers on the fence! 

Jul 26, 2015 09:24 PM #36
Rainmaker
4,433,021
Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

I hope renters will read this post and buy a home.Thanks for sharing.

Jul 26, 2015 09:42 PM #37
Rainmaker
502,385
Sonja Patterson
Keller Williams - BV - College Station, TX
Texas Monthly 5-Star Realtor Recipient for the Hou

For those prospective buyers who are fiscally responsible (and do not anticipate a work-related move in the next 4-5 years), home ownership is the way to go.  

Jul 27, 2015 02:25 AM #38
Rainmaker
864,116
Les & Sarah Oswald
Realty One Group - Eastvale, CA
Broker, Realtor and Investor

Very well put. It is a simple as you have stated. If you are renting...you are paying the mortgage for your landlord. 

Jul 27, 2015 03:46 AM #39
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Rainer
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Sirous M . Jafari

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