I’ve always thought that the biggest benefit of having a mortgage rather than renting was likely to be in the slow eating away of the value of the mortgage payment by inflation.
Before I bought my new house, I was renting a smaller flat for ï¿½375 per month. I estimate that if I had stayed there and the rent had increased with the rate of inflation at an average 3% annually, over 30 years I would have paid around ï¿½217K in rent.
On the other hand, assuming that mortgage interest rates stay at arount 5.5% (yes, I know that’s a big assumption), if I pay off my mortgage over the next 30 years at a rate of about ï¿½500 a month, I will have paid ï¿½180K. That’s ï¿½37K less for living in a bigger place.
I know that some of the extra money can and will be eaten up in maintenance costs, and also that I could have invested the difference between the rent and mortgage to provide a better financial return. Still, the power of inflation is very beneficial when it acts on my mortgage debt.
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