Rent Vs. Buy

Have You Ever Taken $1,000 and Flushed it Down the Toilet?
You may not have literally burned up $1,000, but if you're still paying rent, it amounts to the same thing. When you buy a home you own something solid, real, full of value. Building equity by buying your own home is one of the single most lucrative investments you can make.

According to the National Association of Realtors the gap between rental costs and household income is widening to unsustainable levels, and the situation could worsen. In the past five years, a typical rent rose 15% while the income of renters grew only by 11%.

Buying a home is 23% cheaper than renting nationwide and now is the best time to buy since 2012. This is calculated by an assumed 3.85% mortgage rate on a 30-year fixed rate loan with a 10% down payment.

The New York Times has used an assumed 30-year fixed rate mortgage with a 20% down payment for their reference. With these assumptions buying can be up to is 36% cheaper than rent.

This month on CW57's Real Estate news Josh discusses renting vs. buying. Check out the video below and keep updated with Josh's monthly segments for more information about real estate topics and trends.

Affordability of Home Buying

If you can afford a rent payment, you can afford a house payment. A simple formula determines how much house you can afford. In general, 28% of your total income can be used for a mortgage payment (principal and interest only). Taxes, insurance, homeowners dues and other variables increase your monthly payment and reduce the total loan amount for which you can qualify.

Annual Income:
$20,000...........................................$467
$25,000...........................................$583
$30,000...........................................$700
$35,000............................................$817
$40,000...........................................$933
$45,000..................................... $ 1,050
$50,000..................................... $ 1,167
$60,000..................................... $1,400
$70,000..................................... $1,633
$80,000..................................... $1,867
$90,000..................................... $2,100
$100,000................................... $2,333

Pros and Cons of Rent Vs. Buy

Renting

Pros

  • Only committed to a short term lease
  • Fewer financial strings
  • Property tax and maintenance are built into your rent
  • No upfront costs

Cons

  • No Personalization
  • No Tax Benefits
  • Rent may cost more than Mortgage payments
  • Rent payments can fluctuate

Buying

Pros

  • Investment
  • Renovations - Home Improvements
  • Tax Benefits
  • Mortgage payments potentially lower than monthly rent
  • More Stable Living Situation

Cons

  • Upfront costs - typically 20% down
  • Property Taxes
  • Responsible for Home Maintenance


Renting vs. Buying is all dependant on your personal situation. If you feel now is the right time for you to buy or want more information, contact Josh Lavik & Associates at 608-620-4234.

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