Originally published at: Why you shouldn’t compare rent with a mortgage – Personal Finance Club
I heard this clever quip the other day about how rent is the most you’ll pay whereas a mortgage is the least you’ll pay. I think new homeowners often forget that. We get tempted by the idea of owning our own home, building equity, gaining value. And hey, the mortgage is the same as the rent, so why throw money away?!
But all those other expenses often add up to be just as much as the mortgage payment! The investment isn’t so great when you have to keep dumping more and more money into it. That money could be going into a more productive investment, like index funds or investment real estate!
And as always, this doesn’t mean you shouldn’t own a home. FINANCIALLY, “buy vs rent” generally comes to down the details, largely location. But in practice what REALLY matters is spending modestly on your primary residence. If you buy way too much home, you’ll end up house poor and forced to work your butt off just to make the payments without getting ahead.
As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.