Chris Gmyr

Last year’s housing market fiasco has some people looking at real estate as a waste of money. What’s the point in buying when you can rent a nice apartment for the same price? Why go through the hassle of finding and paying for the perfect home?

Buying a home is an investment. There are disadvantages, but there aren’t many. You have to mow your own lawn, or pay someone else to do it for you. You have to handle snow removal and utility costs. You’re also responsible for repairs and maintenance.

On the other hand, your monthly mortgage payment is actually helping you. A renter is throwing money down the drain; there’s never any return for what they’re paying. They can rent the same apartment for 20 years, and they still won’t have anything to show for it. If you buy a home, you not only get the home itself, you get equity.

Equity is the total worth, or market value, of your home minus what you owe on your mortgage. For example, if you buy your home for $220,000 and take out a loan for $200,000 to pay for it, you start with no equity. Five years later, you’ve paid $40,000 towards what you owe. Your home value has also gone up from $220,000 to $230,000 (difference of $10,000). Added together, you now have $50,000 worth of equity. Equity can be borrowed, used for home repair or remodeling loans or for other expenses. It can also be used for a reverse mortgage. If you later sell your home for a less expensive property, you have “earned” the difference between the two homes.

Buying a home is less expensive than renting. You might be surprised by how much home you can afford. An easy way to get a rough estimate of this is to multiply your current rent payments by 200. You could buy a home at that price for the same monthly payment. If your rent is $900, you could buy a home worth $180,000.  Obviously, this depends on your income and credit rating, but this quick exercise will give you an idea. Remember that the home you can get for this price is probably considerably bigger than your apartment is now.

Another bonus to buying a home is that there are no unpleasant landlords or building managers to deal with. If you keep up on your payments, you can’t be forced to leave your property. It’s yours.

As with any purchase, there’s always a risk. More times than not, though, buying a home is going to pay off. Don’t spend your life renting; you’ll be missing out on one of the best parts of life: owning your own little place in the world.