Whose Mortgage Are You Paying? (Hint: The Answer Isn’t “Nobody’s!”)

No matter what your living arrangements are, one thing is for certain: you’re paying for someone’s mortgage — even if it’s not your own.

Renting an apartment? You’re paying your landlord’s mortgage.

Giving your parents some cash to stay in the basement? You’re paying mom and dad’s mortgage.

Own your own home? You’re paying your *own* mortgage.

Though all three of these scenarios come with some sort of mortgage payment, only one of them will pay you back in time — and you can bet it’s not your landlord.

Why Paying Your Own Mortgage Matters

The biggest difference between paying your landlord’s mortgage and a mortgage that’s actually in your name? That’d be equity — or the part of the property that you actually own.

You see, with every payment you make on your loan, you own a little bit more of the house. When you put down 10% as a down payment, you own 10% of the house. When you pay off 5% of your loan balance, that’s another 5% of the home you own.

In the grand scheme of things, that equates to profits down the line. When you’re ready to sell the home, you’ll take the sale proceeds to pay off the remaining balance of the mortgage, and that 10, 20 or 30% you put in? You’ll get that back — plus any extra, if your home has gone up in value since you bought it.

Obviously, this same scenario isn’t possible with renting. When you hand your landlord a rent check, you’re not gaining any stake in the property, and you certainly won’t get any profits when you move out. Instead, you’re just helping him pay off *his* mortgage, while throwing your own money down a veritable black hole never to be seen again.

Other Benefits of Having a Mortgage

A mortgage is basically a form of forced savings. The more mortgage payments you make, the more money you have stowed away in that home for later on.

It also offers stability. Rent prices have been on a tear in recent years, rising steadily in most major metros in the country. Mortgage payments, on the other hand, are fairly consistent. You aren’t at the whim of a landlord, and you won’t have to deal with sudden payment hikes that threaten your cash flow or your financial goals.

Finally, mortgages come with certain tax benefits, too. You can deduct any interest paid on your loan, as well as other costs like property taxes, home office expenses and more. This reduces your tax burden and, for many people, means a bigger refund come April 15.

The Dangers of Renting Too Long

Still, renting has its perks. You don’t have to do repairs or mow the lawn, and you never have to come up with a hefty down payment before move-in (though there are security deposits, pet deposits, etc.)

Still, if you plan to stay in the same city for a long time, renting just doesn’t make financial sense. You’re not building equity in the property, and you put yourself at the whim of a landlord, who could easily raise your rent and living expenses at the drop of a hat.

If you’re renting, it’s important to really consider your situation before re-signing your lease each year. Ask yourself how long you plan to stay in the area and whether renting still makes sense for your long-term goals. Do you want your monthly payments to go toward your future? To help with retirement or your children’s college tuition? If so, then buying a home probably makes more financial sense.

But Buying a House is So Expensive…

Despite all this, you might still be hesitant to buy a home. After all, a house requires tens of thousands for a down payment, right? And perfect credit to get a mortgage? And all those closing costs?

While it can certainly seem overwhelming (and expensive) if you haven’t bought a home before, you actually have more options than you think — regardless of what your bank account or credit might look like.

You can:

• Use a low or no down payment loan. Many mortgages require only 3% down — meaning just $4,500 on a $150,000 house. If you are eligible for a VA loan (meaning you’re a veteran or military member) or a USDA loan (if you buy in a rural area) then you might not need a down payment at all!
• Apply for down payment assistance. Many cities, states and municipalities offer down payment assistance programs to help local residents become homeowners. Some of these are even grants — meaning they don’t need to be paid back at all.
• Get creative. Consider crowdfunding your home purchase, and use apps like Digit and Acorns to boost your savings. You can even take on a side gig or plan to rent out a room on Airbnb to cover your mortgage payments. Where there is a will, there’s a way, right?

Another great perk to buying a home? Mortgage rates are near historic lows — and they probably won’t stay that way for long. Securing a low interest rate today can help you snag a great home and affordable monthly payment for the long haul. Who knows, it might even be lower than your current rent is!

 Want to crunch the numbers and see what buying a home would look like for you? Then contact a SnapFi Mortgage Advisior today. We’ll help you make the best decision for your long-term goals.