Renting a Mortgage

I am currently sifting through real estate ads and scrutinizing lenders as I evaluate whether home ownership is the best move for me.  While many factors come into play when making a decision as big as this, I am looking for factual, concrete answers to persuade me which direction to go.  In the middle of my research, Yahoo Finance has released an alternative view to the common advice that home ownership is the best investment to make.

Against both the poor money managers and the part time investors, writer David Cook argues that houses are not the best place to put your cash.

Unfortunately for both groups, however, houses are not very good investments. For the grasshoppers, there’s nothing quite as stupid as paying off your 2002 trip to Orlando in 2032, when you finally settle up your refinanced “cash out” 30-year mortgage. And for the ants, economic studies have demonstrated over and over that houses (1) cost more than most people make when they sell and (2) rarely match the long-term returns of stocks or other investments.

The article then explores several statements such as:

• But it’s certainly better to buy a house than to pay rent
• But I have to live somewhere! And I have to pay something for a place to live. Certainly it’s better to pay “deductible” mortgage interest than rent.
• That’s still money that I wouldn’t see otherwise. Even getting just some of my money back is better than getting none.

The quote that stands out presents a different perspective on a mortgage.

Buying a house with a long-term mortgage is just another form of renting.

Mortgage interest is rent that you pay to your lender for the use of its money rather than to a landlord for the use of his house. Yes, the government picks up a portion of that with the tax deduction, but most of your monthly payment neither builds equity nor is deductible. It just goes down the same black hole that sucks up any other renter’s money. And it takes 20 years before a typical borrower pays more principal each month than interest.

This short read is both comprehensive and informative for both the first time buyer as well as the long time home owner.  Read the full article here.