Would you buy a house or just rent? My opinion is that it’s better to have your own house when you have a wife and small children since they are going to build their childhood memories and having a stable place to call your own is better than being at the mercy of a landlord. But if you are single or married without children then there are times when it’s more economical to rent a house than buying it due its total cost of ownership.
I always hear people say that it’s better to own a house since your payment goes to pay for your property while the money you pay for rent just goes away. People who say this are not familiar with the concept of total cost of ownership as well as interest payment.
The mortgage payment for a house and lot consists of principal and interest. Only a a portion of the monthly payment goes to the principal and the rest goes to the interest which is pocketed by the bank or lending institution who provided the mortgage loan. During the first five to ten years of the mortgage payment a sizeable portion of it only goes to the interest and it can be higher than what you will pay when renting. Add to it the property insurance, property tax and maintenance and you will see that you are also giving away money just like a tenant.
On short term basis, renting will cost you less and give you opportunity to put more in investment. It also gives you the flexibility to move to another location quicker if there is a better opportunity there such as higher income or lower cost of living. I am not suggesting to rent all your life but it can be a good starting point especially if you are young and your priority is to put more money in investment.
The point of this note is to not blindly listen to common assumption that buying a house is better than renting. It’s just to give a balanced perspective and better information in making financial decision. If in the end you decide to own a house rather than renting then there’s nothing wrong with it as long as your decision is based on correct information and you are capable.