Looking at the requirements you need to meet in order to get a good mortgage deal, it’s easy to be tempted to just rent an apartment or home. And indeed, if your job or preferences have you moving cities and states frequently, renting may be the more financially responsible solution. But for the large majority of people who are looking to set down roots in the place they live, going for a mortgage isn’t just more practical, it’s also more profitable.
Here are some of the ways in which a mortgage is better for your wallet than paying rent.
- Prices stay stable
- Mortgages have an end
- You can rent the space
- You can make cost-effective improvements
- You can sell later
Landlords are free to try and raise the price of rent whenever your lease runs out, which usually happens once a year. A landlord may want to increase the rent to cover for inflation, or they may want to bring it up to parity with other residential rents in the region. Whatever the case, the result is the same: you paying more to live in the same place.
Mortgages don’t have that issue. You can look at a spreadsheet and know exactly how much you’ll be paying for your mortgage 20 years from now. You can work with mortgage brokers like the ones found on the 1st UK website, especially if you are trying to get a mortgage with a bad credit score. Working with professionals will help you get the best deal possible.
It doesn’t matter if it takes you 20 years or 40, it is possible to eventually be done with your mortgage payments. At which point your cost of living will go down significantly. In contrast, paying rent for 40 years will put you no closer to a point where you no longer have to pay rent.
Many lease contracts have rules against tenants subletting the space. But that’s not a problem with a mortgage — you may not be done paying for the house, but you do own it. This means you are free to lend spare rooms and other areas to help generate some extra income.
If you are planning to travel for a while or move to a different city, you can even lend the entire house, and use the money from the lease to help you keep up with mortgage payments (as long as it doesn’t violate any terms set out by your lender).
Investing in better insulation or higher quality pipes for your home can be expensive at first, but these investments pay off over decades by reducing how much you spend on electricity and maintenance. The problem is that when you are renting a place, these improvements require approval from the landlord, and you will likely not get to profit from the long-term benefits.
That’s not a problem when you own the place you live in. This makes it much easier for you to invest in those improvements that are financially wise but will only pay off decades down the line, creating a more stable home infrastructure.
It’s almost impossible to predict what will happen with real estate prices in a region over the next 20 years. If you are renting a place and property prices in that area experience a sudden surge, you may be asked to vacate the location so your landlord can sell it the moment your lease expires. But if you are the owner, you can sell your house when prices are high at a big profit.
The chances of homeowners making big profits from this approach may be low, but if you are renting the place where you live, your chance of benefiting from rising real estate prices comes down to zero.