When I was a young lad I was always told that renting a house is foolish because you are losing valuable deductions. Who hasn’t heard the phrase, “You are throwing your money away on rent!” While this is true for most people I want to be very clear that paying a mortgage that you can’t afford is worse than renting.
When I bought my first house it was an excellent investment choice. I was just starting in my career and single at the time (although my beautiful bride to be and I were dating at the time). My mortgage payment was roughly 20% of my take home pay for a brand new house. I was able to pay a little extra each month and build equity as we married and started a family.
A wife and two children later we moved into our dream neighborhood and mortgaged a “fixer-upper” at the high end of our price range. Times were tough paying a mortgage, putting money into modernizing the house and raising a family. We were able to pay our mortgage every month but bills were adding up from all sides. We started living paycheck to paycheck and then started spending money we did not have. As you have seen in my introductory post, this led to bankruptcy.
In our current position we are happily renting while paying off our debt with the snowball method (list debts smallest to largest and pay them off one by one while rolling the money into each successive debt – Dave Ramsey baby step 2). The worst thing we could do right now is assume a large mortgage and add to our debt. As we pay off debt we put a little aside each month to get that next dream home.
Hope this helps as you also make your way through your debt journey. As my daughter says, “we are figuring it out, one dollar at a time”.