How do you feel about renting? Do you feel like you’re throwing your money away on rent? Wish you could paint the walls whatever color you want? Are you worried about hanging all your family
Renting Vs. Buying
How do you feel about renting? Do you feel like you’re throwing your money away on rent? Wish you could paint the walls whatever color you want? Are you worried about hanging all your family photos or your favorite wall decoration because you don’t want to lose your security deposit? These are just some of the downsides of renting.
Many renters choose to continue to rent until they can save up enough down payment or improve their credit before entering the home market. Renting is cheaper than buying, right? That’s not necessarily true? Unless you’re willing to live in the cheapest rental you can find and get “gazelle intense” about saving up for a house (Click Here or check out www.daveramsey.com for information on how to make this work), buying a home is likely the more economical way to go.
For this example, let’s say you purchased a $100,000 home at 4.5% interest with 3.5% down. Your mortgage principal after your down payment would be $96,500. With a 30-year fixed rate mortgage at 4.5% would cost you $736.64 a month (Principle and Interest, Taxes, Insurance & Mortgage Insurance). That payment would stay the same for 30 years except for changes in Taxes and Homeowners Insurance. I ran some figures using a 7% increase in Taxes and insurance and over the life of your 30-year mortgage, I calculated that you would pay $404,588.98. That’s a LOT of money, isn’t it? (by the way, taxes and insurance rarely go up 7% a year but I wanted to be fair in my calculations… read on!)
Let’s consider renting that same home. If you can find a really good deal on that property and rent it for just $700 a month, you could save $36.64 each month. How much do you think that it would cost you to live in that same home for the same 30 years? Considering that on the national average, rents go up 7% a year, it would cost you $793,470.61 to rent the property for 30 years. That’s over $388,000 more to rent the same property than to purchase it.
“But Doug! I’m not going to keep renting for 30 years. I’m gonna save up and put 20% down so I don’t have to pay mortgage insurance.” If you can keep that $700 rent payment without it going up, save that $36.64 a month, it would take you over 45 1/2 years to save up $20,000. Purchase the home and you’ll own it free and clear long before then.
I started my Real Estate Career in January 2004 with one of the large, local brokerages. After working there for a while, I found that I wanted more independence and flexibility in the way that I work....