Myths About Renting vs. Buying a Home

Owning a Home Is Cheaper Than Renting

• Homeownership requires myriad costs in addition to the mortgage that can make renting a less expensive option. Once a homeowner's ancillary costs are considered, such as property insurance, local taxes, homeowners association fees and building repairs, owning a home is not cheaper than renting. The homeowner who purchases a less expensive property in suburban areas on the fringes of cities will also need to factor in the costs of commuting to work, whereas a renter always has the option of moving closer to her job to save on transportation costs. Finally, as a home ages, costs go up as basic house systems require periodic upgrades for safety and comfort. Renters never have to worry about meeting these obligations.

Buying Builds Equity

• When real estate values plummeted around 2007, homeowners discovered that equity is no longer a guaranteed benefit of owning a home. Shortly thereafter, the myth about the ease of acquiring real estate equity was dispelled.

  Home equity is the difference between what a buyer owes on a home and what the home can sell for in the current real estate market. In the past, home buyers would purchase a home at a fair price, then sit back and watch real estate values climb along with the equity contained in their home. This would give the owner incentive to sell the property and pocket the equity. However, after home values dropped during the last economic recession, over 50 percent of homeowners actually owed more to the bank than their house was worth, which means they had negative equity in their property. While someday real estate values will be reinstated, currently the myth about real estate always earning equity is something that eludes most property owners in America.

Homeownership Is a Good Investment

• Many people claim that owning a home provides a good return on the initial investment of a down payment, but investment analysts can prove that stocks and bonds actually net better profits for their owners. Some of the safest investment vehicles an individual can buy, such as Treasury bills, which only appreciate by about 2 percent a year after inflationary adjustments, actually give a higher return than real estate, which historically only appreciates by about 1 percent a year in ideal economic conditions. In addition, stocks and bonds appreciate about four to six times higher than real estate over the course of a few decades.

Renters Have Less Personal Wealth

• Perhaps one of the biggest ironies surrounding the myth about renters being at an economic disadvantage is the simple fact that the majority of homeowners don't actually own their homes; the banks do. Until a homeowner's bank loan is paid off, this real estate asset is technically a liability for the individual. Renters, meanwhile, possess a personal balance sheet indicating greater wealth because they don't have a monthly home mortgage obligation detracting from their personal wealth. A renter always has the option of dedicating excess funds to other types of wealth-building vehicles, such as stocks, bonds, mutual funds and even certain antiques and collectibles.