HOMEOWNERSHIP - BETTER TO RENT OR BUY?

Feb. 24, 2012

HOMEOWNERSHIP - BETTER TO RENT OR BUY?

Is it better to rent or buy? This is a question that has been debated over time.
Homeownership is more affordable today than anytime in the last 30 years. It is like having a self-imposed savings plan. Not only does it enhance civic pride and improve voter turnout but also increases personal happiness and provides a better familial environment. Studies have also linked it to reducing crime as well.
"According to the most recent data from the Federal Reserve Board, a homeowner’s net worth is 45.9 times that of a renter’s.
An analysis over a 31-year period across 23 metropolitan areas compared the ownership benefits in terms of appreciation and interest deductibility and the costs homeowners incur with downpayment, taxes, insurance and maintenance. When it was assumed that renters reinvested any savings in rent (versus a higher monthly mortgage payment), maintenance and downpayment, renters had a greater portfolio than buyers in 91 percent of the areas examined. However, when the model allowed renters to spend any savings rather than reinvest those savings, 84 percent of buyers came out ahead."
Below is a chart of renting vs buying.

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 after3 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

As you see homeownership is a wise investment in your future. One that will only benefit you and your family. So why not start now when the interest rates are at their lowest.

Low interest rate = more buying power = larger home for you and your family.

If you are a first time home buyer and you are unsure where to start - you can start right here by contacting BRIDGE REAL ESTATE. We can walk your through the process and help you to get started. Call today.