Buying vs. Renting

For many people, the decision to buy a home or rent can be a challenging one.  There are many advantages to buying a home versus renting a home or an apartment.  It may seem like the better alternative for some is renting, however in most cases, it is better to buy a home than to rent. Renting is better only if your rent is very low, or if you plan on moving in a few years.

As you know, there are other things to consider regarding the financial pros and cons of renting or buying.  

Your income, savings, and monthly expenses are also big factors and play an important role in determining how large a mortgage you can afford.  As a general rule, if you can afford a home, you should probably buy one instead of renting.  But "afford" means more than just saving up a 5% down payment.  

It also means having the funds necessary for maintenance and upkeep on the house, and money for property taxes.  Before buying a home, make sure you know what these expenses are and that you can afford them.

Monthly Expenses of Home Buying

Your rental company 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).

It may seem a bit overwhelming when first determining whether renting or buying a home is the right decision for them.  Below you will find a few of pros and cons of renting and buying.  Consider these factors when determining which direction is right for you.  If after looking over the chart you find you would like more information regarding renting or buying a home, feel free to contact the Ben Lang Properties real estate team.

 

When determining if it’s better for you to rent or buy a home, you will need to:

• Compare the "up front" costs of each:

1. Buying: down payment, loan costs
2. Renting: deposit, first month rent

• Compare monthly costs for each:

1. Buying: mortgage payment (which includes taxes and insurance); utilities; maintenance
2. Renting: monthly rent; utilities (some may be included in rent)

• Calculate what you can afford for housing, based on your income and other debts

Should you rent or should you buy your home?

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 homeownership, the homeowner's payment is less than the rental payment after 3 years

Ultimately, you will need to figure out if you can afford owning a home in the first place.  Then consider what your local real estate market is like and consider how long you will be staying there - then make the right decision, leaning towards homeownership whenever possible. 

Let us help you find out what you can afford!  View a financial comparison of buying versus renting in the Buy vs. Rent Calculator below.  It takes more than looking at your mortgage payment to answer the question, “Should I rent or should I buy?”  This calculator helps you weed through the fees, taxes, and monthly payments to help you make a good financial decision.  

Complete the fields below (e.g., Cost of Home, Down Payment, Monthly Income) and click Calculate Now. To view the different results of your calculation, click on the various tabs. To mail yourself a copy of your results, click the Receive this Detailed Analysis link.

If you would like more information or have questions regarding homeownership, don’t hesitate to contact one of Ben Lang Properties Real Estate professionals.  We are available to answer any questions you may have regarding the home buying process.