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Buy vs. Rent

Posted on March 26, 2013 by Curt Schreiber in Uncategorized

Buy vs. Rent
 

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 homeownership, 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 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).

 


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