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Home Buyer's Recession Survival Guide - Why Rent? Why Not?

Updated on May 26, 2009

Tenants continually whine about throwing their money away in paying rent to their landlord instead of building equity by contributing that money towards a mortgage. In the overwhelmingly vast number of cases, they are absolutely correct. Their long term financial picture is going to be much brighter by being home owners.

Surprisingly there are some perfectly good reasons to not own your own home, although they are restricted to relatively few people in the United States. One of these people is "Fred." Here is what "Fred" has to say on the subject.

"Like a lot of other guys I know, I got taken to the cleaners by a late-life divorce. The judge saw fit to give her the house and give me the shaft. So there I was, hardly a spring chicken, with my suitcase in one hand and a Greyhound Bus Ticket in the other wondering what the heck I would do next.

"I didn't have the down payment for a steak and egg breakfast, let alone a house, so I had to find a reasonably decent place to rent. I ended up leasing this condo from a private individual who had purchased it many years earlier and had likely paid off his mortgage by now, so anything he could make on it was gravy. I got a real good deal on it. I'm paying $750 a month on a five year lease.

"Now you figure that if I wanted to buy the same condo, like the one next door for instance, I would have to come up with 20% down on an asking price of $160,000. That's $32,000 in cash, and you can bet that by the time the closing fees, points, insurance and all the other rest of the stuff they pile on was done, I'd be looking at coughing up 40 large. In cash.

"Even if I could come up with that much cash, and I couldn't even in a month of Sundays, then I'd be in for a whole whack of extra expenses. My credit went the way of my house and my stamp collection, so the best rate I could get even with 20% down is 6.75%. That comes out to a monthly payment of $830.21. But that wouldn't be all. I'd have to add $138 a month for condo fees and $106 for property taxes bringing the whole monthly nut to over $1,074! That's $324 extra a month which buys a lot of beer! And when the toilet backs up, or the refrigerator blows up, or a door warps and won't close, I'd have to pay for the repairs instead of calling up the landlord and asking him to fix it at no cost to me!

"So look at it from my standpoint. I'm 61 years of age, I'm fat and I smoke like a chimney. My chances of being around to pay the last rate on a 30 year mortgage are slim to none. Why the heck should I buy anything? So that when I go to that big putting green in the sky my kids can get it all? They've got more than enough inheritance in the house that my ex is going to eventually pass onto them. They don't need anything more from me!"

"Fred" is essentially correct in his calculations. He may not be considering that when his five year lease is up he may be facing a considerable rent hike. However, even if his rent were to be jacked up by 40%, he would still be paying less in his second five year term than his total monthly outlay in a mortgage situation.

Most of us aren't in "Fred"'s position and hope we never are. However, it just goes to point out that home ownership isn't necessarily the best option for 100% of all Americans. There are always exceptions to the rule!

Read The Entire Survival Guide

Home Buyer's Recession Survival Guide - The Subprime Meltdown
Home Buyer's Recession Survival Guide - The Advantage Of Renting Over Buying
Home Buyer's Recession Survival Guide - Why Rent? Why Not?
Home Buyer's Recession Survival Guide - Five Common Mistakes House Buyers Make
Home Buyer's Recession Survival Guide - Get Your Home Sold Quickly & At Your Asking Price
Home Buyer's Recession Survival Guide - Improve Your Home's Value And Sell It For More!
Home Buyer's Recession Survival Guide - Learn The Value Of Curb Appeal
Home Buyer's Recession Survival Guide - Home Staging: Valid Selling Technique Or Fraud?
Home Buyer's Recession Survival Guide - Before You Go House Shopping
Home Buyer's Recession Survival Guide - The Home Condition Checklist
Home Buyer's Recession Survival Guide - Getting A Mortgage From Different Types Of Lenders
Home Buyer's Recession Survival Guide - What To Do After You're Turned Down
Home Buyer's Recession Survival Guide - New Initiatives To Help Get You Approved
Home Buyer's Recession Survival Guide - Isn't HUD An Old Paul Newman Movie?
Home Buyer's Recession Survival Guide - Jumbo Isn't As Huge As He Once Was
Home Buyer's Recession Survival Guide - FHA Q&A
Home Buyer's Recession Survival Guide - The FHA's Credit Requirements Vs. The Bank's
Home Buyer's Recession Survival Guide - Your Credit Score And Your Mortgage
Home Buyer's Recession Survival Guide - Credit Score Confusion
Home Buyer's Recession Survival Guide - Keeping That Credit Score Nice & High
Home Buyer's Recession Survival Guide - Minimize The Interest Payable
Home Buyer's Recession Survival Guide - What Is PMI & Why Do I Care?
Home Buyer's Recession Survival Guide - The LIBOR-COFI-COSI Alphabet Soup
Home Buyer's Recession Survival Guide - REO: Get Rich Quick Or Just Waste Time?
Home Buyer's Recession Survival Guide - Obtaining Flipping Money
Home Buyer's Recession Survival Guide - Consider The Additional Costs
Home Buyer's Recession Survival Guide - What Is Escrow?
Home Buyer's Recession Survival Guide - Tips To Avoid Foreclosure
Home Buyer's Recession Survival Guide - The Changing Value Of Your Mortgage Dollar
Home Buyer's Recession Survival Guide - How To Ride The Interest Rate Spikes
Home Buyer's Recession Survival Guide - Can't Get A Mortgage? What A PITI!
Home Buyer's Recession Survival Guide - Calculating Your Closing Costs
Home Buyer's Recession Survival Guide - Mortgage Broker or Mortgage Banker?
Home Buyer's Recession Survival Guide - The Magic Of A Down Payment
Home Buyer's Recession Survival Guide - A Refinance Checklist
Home Buyer's Recession Survival Guide - Refinancing With Bad Credit
Home Buyer's Recession Survival Guide - The Self-Employed Mortgage Maze
Home Buyer's Recession Survival Guide - VA Loans
Home Buyer's Recession Survival Guide - Offset & Reverse Mortgages
Home Buyer's Recession Survival Guide - The Reasons To Not Buy An Offshore Retirement House
Home Buyer's Recession Survival Guide - How To Pay Less Than $500 A Month
Home Buyer's Recession Survival Guide - Five Easy And Cheap Tips To Save Big $ On Energy

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