The following case studies are 5 and 10 year case studies of the money you would spend renting, and the money you would spend buying:
Buying after 5 and 10 years:
Say you buy a $200,000 home with 3.5% down. Your monthly payment will be about $1100.
- After 5 years your loan is down from $193,000 to $169,000.
- After 10 years your loan is down to $145,000.
Renting after 5 and 10 years:
Renting the same type of house that is worth $200,000 would cost you more as a renter, at least $1200 or $1300, not counting rent increases each year:
- After 5 years, you will have spent $72,000 in rent.
- After 10 years you will have spent $144,000
- You also will have spent $1200 on the initial deposit, which you may or may not get back.
Your situation after renting:
- You still do not own the house.
- You will never be able to recoup the rent money you spent: it paid someone else's loan, and you can't sell the house because it's not yours.
- Rent most likely went up over the years, which cost you even more money.
- Your credit score will not have been improved whatsoever by all your on-time rental payments.
Your situation after buying:
- You have $30,000 of equity in your home after 5 years.
- You have $55,000 of equity in your home after 10 years.
- You can rent it out, make about $200-$300/month on your renters after you pay the mortgage, and buy a bigger home.
- You can sell the home, and even in the worst case scenario if you don't make any money, you will have lived for free for 5-10 years.
- If you do make a profit...you just made a profit!
- If you stay in the house and keep paying your mortgage, you will keep paying your loan down.
- If you make an extra $100 payment per month, your loan will drastically go down faster.
- If you rent it out, someone else will pay your loan for you, and after the loan is paid off, you can keep it as an investment property and make $1250/month, which is $15,000 per year.
The moral of the story is that a buyer has PLENTY of great financial options when owning, but a renter has no options or benefit after renting for several years. Don't forget, renting costs you MORE MONEY!