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 »  BUY VS. RENT - WHY IT MAKES SENSE TO OWN YOUR HOME

Buying a home is one of the biggest financial decisions you will make. Whether you have purchased a home in the past, or this is your first time, finding the right Realtor and lender to help you through the process and give the best financing options to fit your individual needs is critical.


Buying versus Renting

There are many advantages to buying a home versus renting one. One of the major reasons we buy a home is for shelter: we can do with our own home pretty much what we want. Another is that we get to put down community roots: we can have a say in what's going on where we live. And some are purely financial. Others are more emotional. Whatever the reason, owning vs. renting a home is the right decision for many reasons.

Your income, savings, and monthly expenses play an important role in determining how large a mortgage you can afford. To figure out the amount you can afford, please click here.

Savings: Buying

In many cases, the amount of money a renter spends on rent can be about the same as or less than the amount a homeowner spends on a mortgage. With the tax benefit for homeowners, the savings can be significant.

Buy vs. Rent Comparison
The chart below shows a cost comparison for a renter and a homeowner over a seven year period.

  • The renter starts out paying $800 per month with annual increases of 5%
  • The homeowner purchases a home for $110,000 and pays a monthly mortgage of $1,000
  • After 6 years, the homeowner's payment is lower than the renter's monthly payment
  • With the tax savings of home ownership, the homeowner's payment is less than the rental payment after 3 years
Years
Rent Payment
Mortgage Payment
Monthly Difference
After Tax Savings
Yearly Difference
After Tax Savings
1 800 1000 -200 -50 -2400 -600
2 840 1000 -160 -10 -1920 -120
3 882 1000 -118 +32 -1416 +384
4 926 1000 -74 +76 -888 +912
5 972 1000 -28 +122 -336 +1464
6 1021 1000 +21 +171 +252 +2052
7 1072 1000 +72 +222 +864 +2664
8-30     Savings increase every year

Monthly Expenses: Buying

Your landlord/property owner takes part of your rent payment to cover certain housing expenses. When you decide to purchase a home, you accept responsibility for paying for these expenses (listed below). They are additional costs to your monthly mortgage payment and should be included in your budget estimates:

  • Property Taxes and Special Assessments
  • Home/Hazard Insurance
  • Utilities
  • Maintenance
  • Home Owner Association (HOA) Fee: Doesn't apply to all purchases. It pays for trash and snow removal and maintenance of common grounds if applicable.
  • Membership Fee: It may pay for recreational facilities and other services (cable TV).

Related Information:

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