What Is the Cost of Renting vs. Buying?

This is a question many people begin asking themselves when they first consider a home purchase. They start thinking about the cost of rent versus the equity they could be building in their own home. While buying is the American Dream, it can be hard to know the right time to move from renting to buying. To know which is better for your situation, you have to do some calculations.

What Goes Into the Decision

While there are a lot of factors to consider when deciding to rent or buy, the financial aspect is one of the most important. You can use any one of several calculators online to help you determine which option is better for you financially. However, you should know what information is being used in each choice.

For renting, you not only consider the monthly amount you pay but any renter's insurance and the security deposit you must include. Rent goes up so you have to figure in the cost of rent appreciation over time.

To figure in the cost of buying, you start with the purchase price and include the down payment along with any closing costs you have to pay. Then, you add in the monthly mortgage payment along with property taxes and insurance.

Maintenance is added in while deductions on your taxes for interest and property tax are also calculated. To get a true estimate, you have to figure how long you will be in the home, the price you would get for selling and any closing costs you would pay as a seller.

Several assumptions are used in the calculations such as the mortgage rate, your income tax bracket, and how much the home will appreciate over time. The end result is the total cost of renting or buying over time. While some of the information will require estimating such as future appreciation, it can help you understand your options when you see the numbers in black and white.

An Investment

While buying a home is often an emotional decision, it is also a financial investment in your future. For this reason, it is important to look at facts and figures to help you determine if you are ready to buy and how much you can afford.

If you have decided that now is the time to buy, give me a call and we can get you started on your way to the American Dream.