How We Got Here - Renting

Since Mr. B and I graduated college, we have been renters.  And we have been told repeatedly by friends and family that this is throwing money away.  Of course, all of these people are adhering quite blindly obediently to the series of adulthood rites of passage.  Degree, job, new car, starter home, dog, marriage, baby, larger "family" home, and more babies.  Try to be the first of your group of friends to achieve all of them!  There's nothing like keeping up with the Joneses.

Many of these people only scratched the surface of the financial implications of owning a mortgage home prior to taking the plunge.  Can I afford the monthly payment on a 30 year mortgage?  Can I save a few thousand dollars for a down payment?  If yes, then why the hell not?  Buy as much house as you can possibly afford (or, at the very least, the biggest, fanciest house among your group of friends).  Nevermind if you're so house poor you don't even think about saving for financial freedom until your 40's.

At the current 3.7% national average fixed rate on a 30 year mortgage, Mr. B and I could trade our $1,000/month rent payment for a $1,000/month payment on a $217,000 mortgage.  Toss in some of our savings for a down payment and we're easily in a quarter million dollar home.  Not too shabby.  (For reference, we're talking Mid-Atlantic real estate here.)  So why are we not all over that?

First and foremost, it's not that simple.  The $1,000/month mortgage payment does not include taxes, homeowner's insurance, and the cost of our time and materials to maintain a personal residence and property.  Secondly, the total interest paid on such a mortgage is $142,573.  That's more than 11 years and 10 months of $1,000 rent payments thrown in the trash.

Of course, our rent payment will probably go up over the next few years and we do pay renter's insurance, so the above is not an entirely accurate picture.  However, the argument that renting is just a straight waste of money is becoming much less persuasive.

Now don't get me wrong.  We do plan to build/buy a home eventually.  But we're talking the graduate level personal finance approach - buying a house in CASH MONEY (to avoid all interest and maybe even be in the position to do a little more negotiating on the price) and only getting as much house as we need, rather than as much as we can afford.  It's a moving target, but we'll probably rent for at least another 2 or 3 years depending on how our net worth grows and how long it takes for the housing market to hit absolute rock bottom.

Is it tough to wait?  Absolutely.  First and foremost, I'm mildly obsessed with interior design and am itching to decorate a home.  Sure, I can fix up our rental, but only to a point.  I'm not going to put too much money or effort toward something that is only temporary and, not to mention, will have to be put back in its original state when we leave.  Secondly, despite my talk about graduate level personal finance, I find myself keeping track of, if not keeping up with, the Joneses.  Because buying a home is a major milestone for many people my age and is talked about with such pride, I am sometimes tricked into feeling as though I'm behind the curve. 

At times like those, instead of daydreaming about my future home, I decide to daydream about the glorious day in the future when Mr. B and I will pay for a house in cash.  And for the following 20 years, while all of our peers are still paying down some nauseating mortgage balance, Mr. B and I will be one step closer to financial freedom.