I have this impression that it’s seen as a riskier decision to buy a home, knowing you won’t live in it long enough to pay off the mortgage and then sell it when you’re ready to move away, when compared to renting a home. Am I off base on that, and if so, why is this the case?
In: Economics
I bought a place about 9 months ago but there’s a very real possibility that my wife and I will move to a different state in the next 3-5 years.
Whilst some of my money is paying off the mortgage, about half to 2/3 is going to interest on the mortgage but the interest is still lower than the equivalent of rent so I’m ‘saving’ money each month by having a mortgage compared to paying rent.
However, there were significant costs (stamp duty) when buying the place. I worked out that it’s going to take 2 years before the money that I ‘save’ each month because my mortgage interest is fewer than paying rent pays off the cost of buying a place. Not to mention having to pay real estate fees when I sell the place.
It’s possible that stamp duty and selling costs will wipe out any increase in wealth that I’ll have from only owning the place a couple of years compared to renting.
However, there are benefits. I don’t need to hassle a landlord to get stuff done, I can do it. There’s security, I don’t need to worry that my rent will go up 20% next year. Etc.
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