Mortgage Payments vs Rent
By Max Hunter
There is an age-old debate on whether or not it makes more sense for people to
rent or buy. Though it is hard to really understand why there is a debate at
all. You will definitely hear arguments from both camps that appear logical but
if you do a little digging you may find that some of the arguments are thin at
The simple fact of the matter is you are always better off making a mortgage
payment over a rent payment if you can afford to do so. It is not uncommon for
mortgage payments to actually be lower than many rent payments are. So the key
is to understand an important, fundamental difference between making a rent
payment and making a mortgage payment.
Rent payments are made on a monthly basis for the most part. That money gives
you the right to live in the house or apartment for the specified period of
time, typically one month. You receive no other tangible benefits from that rent
payment. It does not improve your credit score, it does not produce equity, it
simply gives you the ability to live in the residence.
A mortgage payment, first and foremost, also gives you the ability to remain in
the residence, however, it does much more than just that. First, the mortgage
payment helps you build equity in your home. Equity is the difference between
what you owe on the property and what the property is worth. That equity can be
used for many things including debt consolidation, home improvements, extra
funds, etc. Equity becomes a powerful tool in your overall financial plan.
Mortgage payments also include interest payments which can be tax deductible,
helping your overall bottom line at the end of the year. Rent is not tax
deductible in most cases. Your mortgage payments will also help improve your
credit score if you continue to make payments on time. Mortgage payments are
tracked if your lender reports the loan, which most lenders typically do. Your
overall financial outlook can improve dramatically with an increased credit
score resulting from on-time mortgage payments.
Some will argue that you are tied down to a home if you buy it, while renting
gives you more flexibility. Though it is important to remember that if you rent
a residence you are typically obligated for a specific period of time, typically
a year. If you own a home, however, you are able to sell and relocate any time
you wish, or you can rent the residence and relocate any time you wish. This is
an important and fundamental difference between the two. It is true, however,
that how quickly you are able to sell your home will depend on the location, its
value, its condition and the market at the time of the sale. You do have the
flexibility, however, to sell anytime you find a willing and able buyer.
One time where renting may seem like a more logical choice than buying is if you
are going to live in a particular area for only a short period of time. In order
to determine if it makes sense to rent or buy in this type of situation you
really need to analyze your overall financial plans. You need to get a full
understanding of any and all costs associated with you buying the home, the
likelihood you would be able to sell it or rent it when you were relocating from
the area, etc. For some, even in a short term situation the better financial
decision may be buying, especially if they are able to rent it and build equity
on their tenant. This may, however, impede them buying a second home, though if
they have adequate credit and income they may not have any problem buying the
second residence as well.
It is difficult to come up with a scenario that makes renting the clear cut
right decision. It seems in most situations buying, if an option for you is the
better decision financially. Though consulting with a mortgage professional is
the only real way to help determine these things as they can give you a clear
understanding of what is and what is not possible for you. Your financial
advisor can also assist you in making this decision.
Owning your own home has many non-financial benefits as well, however, only you
can evaluate those. You know what is and what is not important for you. You know
what obligations you are comfortable having and which you are not. The key is to
evaluate your personal situation rather than listen to those who are convinced
that one or the other is right for you.
Max Hunter is the author of many credit related articles. If you are looking for
help with Home Loans or any type of credit issue please visit us at