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Why Mortgage Payments are lower than Rents

Applying a home loan and paying for its mortgage is generally a form of acquisition that will turn into and asset in the end. However, with the lowering prices of houses today, it seem like the situation is reversed because many of the homeowners today are trying to sell homes out of necessity. An they have discovered that the monthly mortgage payments are getting lower than the monthly rents and keeps on getting worse to draw interest of their prospect clients or buyer.

One of the few reasons why mortgage is lower than rent is that, mortgage rates are really low, which means that when selling a house, they will most probably be higher since the resale value is the most part of the price that people are willing to pay.

The other reason would probably be the cash issue. Everybody want cash today that is why in order to get a mortgage, a cash down payment is needed first. After making the down payment, the remaining unpaid amount will now be the ones computed for mortgage, which is already lowered by the down payment, and since mortgage rate are now extremely low, there will really be a possibility of a low mortgage amount.

In addition, as we are going to recall, house prices in the past are high and continue to soar over the past few decades. However, as we all know, it falls down over the past few years and is expected to continue to fall, whatever had happen to rents for many years yet.

If you were to compare about having your own house before and the present, a house right now is more of a liability than an asset. When you have a house, you will be living in that exact place for the rest of your life, and if you are in a place wherein establishments can be counted with your fingers, it will be harder for you to get a new job when you become unemployed.

Another aspect that made the house a liability, it needs constant maintenance and it means that you will be spending a lot for your house without an income from it. In addition, the property taxes and insurance will be your liability to the government as well.

The mentioned reasons above are just a few of the many reasons why mortgages are lower than rents. However, even if the on going house prices sounds bad in the credit market, it is an advantage to those who prefer to own a house than renting. Despite of consideration that a house is a liability than of an asset, I will still prefer to own one especially when I retire wherein I need to have a permanent place to stay and relax.

And, if letting renters stay in your house is a good source of income, I am still skeptical of doing it since many of the renters nowadays do run out of money to pay for rents, though not all of them are the same, but the risk is always there.