Renting is Throwing Money Away, Right? (2015)
The “pro renting” crowd has a lot of consistent falacies in arguments:<p>- Financial calculations ignore the leveraged nature of buying a home. Small increases in property value are multipled relative to your initial investment.<p>- Calculations also often assume someone just pays the minimum mortgage payment for the full term of the loan. Even small additional principal payments (which most mortgages allow without penalty) drastically reduces the duration of the loan and interest paid.<p>- “I don’t want to pay those high real estate taxes.” Renters still pay the same real estate taxes, it’s just baked into the rent and can’t be deducted from taxes.<p>- The tax system is very biased in a favor of home ownership. You basically get penalized at tax time if you don’t own your home as expenses both owners and renters “pay” (property taxes, mortgage interest) are only deductible for the property owner. This can make a huge difference. A renter paying $2000 a month in “after tax” money is spending a lot more than a home owner spending $2000 a month but paying the interest &#x2F; propert tax portion of that 2k with pre-tax money!<p>- Capital gains from home ownership are also tax free (up to half a million in gains for couples).