Ramit Sethi discusses a couple who believed buying a home would be cheaper than renting, walked through a basic monthly mortgage vs. rent comparison, and argues that when you include additional "phantom" costs (taxes, interest, maintenance, future repairs, utilities), ownership can be more expensive than renting.
They made the biggest financial decision of their lives and they doubled their expenses. Why? Because they believed it would be cheaper to buy rather than to rent. Did you own or rent when we moved to high cost of living and what was the reasoning behind the buying? Because a mortgage was cheaper than rent. Mortgage here is $2,073 a month. What would you rent it for? 25, 26, 27. When I factor in utilities, it's 2073 plus $373. Yeah, I just ran some basic numbers with them. It happened so quickly I don't even think they realized it. Once we factor in the utilities that they pay every month, their total housing cost is $2,400. Again, if you have a simple view of money, you go see it's cheaper to own. But let's go deeper. What about all the phantom costs including tax and interest on their loan? What about maintenance including random light bulbs and a roof repair nine years from now? If you factor in all those things, it is more exp them to own than to rent.
