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Renting? You're Still Paying a Mortgage

Posted by The PerfectHouse Team on Tuesday, November 11th, 2014 at 5:54pm.

 The old saying goes "You never live anywhere for free" is true unless you are still at home with your parents. Many do not own their home for fear of obligation or perceived risk of having a mortgage. 

Fear of obligation may be misplaced because a lease is still a mortgage. A key difference is, even if you discount the more favorable income tax deductions for owning is that over time ownership provides a foundation for a families overall financial plan. Payments to the principle balance and increase in a home's value reward a home owner with Equity. Renters are paying a mortgage for a landlord and the landlord receives the equity and it can increase their wealth over time.

There are limits, but at retirement home equity can be accessed tax free through liquidation of the property, a reverse mortgage or an equity loan. This could be a savings of as much as 35% or more depending on different factors. To maximize your return your financial planner and accountant should review these options in conjunction with your other savings vehicles.

 
Owning is not for every situation, sometimes timing dictates renting is a better option. Having a stable of professional advisors is the best advice we can give. Your Full time Professional Realtor, Family or Estate Planning Attorney, Financial Planner and your Accountant will work as a team to give you guidance that may dramatically increase your family's wealth over time. Let's face it, we do not know what we do not know and who you Trust for advice is very important.

Below is an excerpt from a KCM article dated October 22, 2014 we think is one opinion worth a longer look.

 Billionaire Says Real Estate is Best Investment Possible 

Billionaire money manager John Paulson was interviewed at the Delivering Alpha Conference presented by CNBC and Institutional Investor. During his session he boldly stated:

"I still think, from an individual perspective, the best deal investment you can make is to buy a primary residence that you're the owner-occupier of.” 

Why does he believe home ownership is such a great
John Paulson
investment? 

Paulson breaks down the math of home ownership as an investment:

"Today financing costs are extraordinarily low. You can get a 30-year mortgage somewhere around 4.5 percent. And if you put down, let's say, 10 percent and the house is up 5 percent, which is the latest data, then you would be up 50 percent on your investment." 

How many are seeing a 50% return on a cash investment right now? Paulson goes on to compare the long term financial benefits of owning verses renting:

“And you’ve locked in the cost over the next 30 years. And today the cost of owning is somewhat less than the cost of renting. And if you rent, the rent goes up every year. But if you buy a 30-year mortgage, the cost is fixed.” 

Bottom Line Whenever a billionaire gives investment advice, people usually clamor to hear it.

This billionaire gave simple advice – if you don’t yet live in your own home, go buy one.

What should be Your Next Steps?

 Step 1: Have a consultation with an experienced Realtor to discuss your needs, timing, short and long term housing plan.
 Step 2: Speak to a Trusted Lender to review your purchasing options.
 Step 3: Meet with a financial planner to review your long term insurance and wealth building plan. 

Interview professionals until you find one you like and feel is not just trying to make a sale.

Remember only you will know what's best for your family. Sadly many people will take action or fail to take action without learning more about the individual parts of their financial plan and without knowing the entire process.

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