According to the latest statistics, buying a home beats renting by 35 percent in the largest cities in America. I don't believe it. I think real estate experts conveniently leave out so many of the hidden costs of homeownership when declaring it's better to buy than to rent. According to a recent article by Forbes, it's one-third cheaper to buy a home than to rent. A recent study by Trulia showed it's more expensive to buy a home compared to last year because of higher mortgage rates and home prices. However, experts say homes are still undervalued. And, the prices are not high enough to tip things in favor of renting versus buying. When I look back on how much I spent to own a home in the past 8 years, I'm somewhat shocked and disgusted. I find it hard to believe I couldn't have been better off as a renter.
Throwing money down drain
I always heard it is throwing money down the drain to rent instead of buy. In the past 8 years, we spent about $33,000 on a down payment on our $183,000 new construction Florida house. We spent about $40,000 in mortgage interest and about $30,000 on taxes and insurance. In addition, we have paid at least $80,000 in principal payments. In other words, we have already paid $183,000 in the past 8 years, but we still have 14 more years left on our mortgage.
Rethinking our approach
Instead of buying our home, we could have taken my father-in-law up on his offer for us to live in his Florida house. We would have paid half of the rent and utilities to live in the house year round. A snowbird, he lives in the house about 7 months out of the year. We would have spent about $400 a month including utilities. We would have been able to split other costs as well such as cable, telephone, Internet and the replacement of appliances.
Considering the tax bite
Real estate experts neglect to explain to new home buyers that their property taxes can fluctuate every year. Other hidden costs of home ownership include the CDD or community development district fees, home owner association fees and maintenance/landscaping costs. We were fortunate that our property taxes decreased in the past few years, but now they are starting to rise again as the homes in our neighborhood go up.
Paying cash for a deal
I recently read that all-cash deals are the rage in different parts of the country. An article by the Brooklyn Daily Eagle said the number of all-cash deals has been unprecedented. Putting just 20 percent down isn't enough to compete with the motivated buyers in a market with low inventory. If my family could have saved up money for a cash deal, we would have saved the $40,000 we spent on mortgage interest in the past 8 years.
Although it might seem cheaper to buy than to rent, I think the numbers are misleading. People who can make a home purchase with cash are definitely in a better position than renters. However, when I consider how much I am spending on interest, taxes, insurance, maintenance and other fees, it's not mystery why renting is still appealing to many people. It's nice to have personal ownership and a lot of personal space. At the same time, I'm not sure it's worth the amount of money I've spent on the financial sinkhole that is my house.
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