⌄ Scroll down to continue ⌄

Misconception: Renting is wasting money

⌄ Scroll down to continue ⌄
Misconception: Renting is wasting money

Chris Welch at InvestorGeeks shows us why renting may not be a bad idea. Normal perception shows paying mortgage for a house is better than renting – at least you could own the capital of the house progressively. However in this article, Chris runs through sometimes renting may not be a bad thing at all:

… Look, I like being appreciated just like the next guy, but this rule of thumb takes into account two assumptions. First, we can’t take into account taxes or price appreciation. With few exceptions, a home purchase should first make financial sense without taking appreciation into account, so that no matter what the price of your home does, you won’t be perched precariously over a financial disaster.

Because personal mortgage interest is deductible on your taxes, your overall tax burden is minimized at the end of the year. Because most of the interest in a mortgage is paid at the beginning of loan, your first year you would receive the greatest benefit. For a typical mortgage on a $125,000 house at today’s interest rates, you’d be spending about $7,400 on interest for the first year (it drops to $7300 in year 2). Of the deductible amount, the standard deduction will chop off a good hunk of that right away, so you’d be saving maybe an extra $1,200 on your taxes, and that’s for only the first year! It’s money, but nothing to write home about, in my opinion. In either case, I don’t believe you should spend more money to have a bigger deduction…

Misconception: Renting is for Suckers – [InvestorGeeks]

More by this author

Leon Ho

Founder of Lifehack

11 Ways to Motivate Yourself to Complete any Task in New Year
Interview with Tim Ferriss of The 4-Hour Workweek – Part 1
Book summary: A Technique for Producing Ideas
10 Ways to Extend Laptop Battery Life
Bob Parsons on His 16 Rules for Survival

Trending in Lifehack

1 5 Simple And Obvious Tips For Better Communication 2 2 Minutes Book Summary: Talk Like TED 3 1 Minute Book Summary: The Productivity Project 4 2 Minutes Book Summary: How to Read a Book 5 1 Minute Book Summary: Always Hungry?

Read Next

Advertising
Advertising

Explore the Full Life Framework

Advertising
Advertising