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Is It Better to Rent Or Buy?

June 16, 2011 2 comments

I know that men and women my age feel more comfortable renting. It’s easy, little commitment, and a lease is less stressful to read than a real estate contract. What you may not know is owning a house is usually always cheaper than renting. If renting was cheaper, then how would so many landlords make money off you month after month?

Here are some facts about renting versus owning:

  • Renting is a dead investment, you’re paying the landlords mortgage every month so he/she can eventually sell it and make even more money on their house.
  • Renting offers no equity, you don’t own anything.

 

  • Renting offers no tax benefit, while  Interest on your mortgage is tax deductible.

 

  • Houses, when taken care of and properly maintained, appreciate. A great mindset to have is that every mortgage payment will eventually be repaid to you, plus some extra.

Here is payment plan based on a $100,000 house with a 30-year fixed rate loan with 5% interest rate and a $90,000 loan balance.* Typical rent for this price would be about $1,000.

Rent          vs.            Own

Monthly Payment $1,000 Monthly Payment $   483
Insurance $     30 Insurance $     50
Taxes $       0 Taxes $   60
       
Total Payment $1,030                                      Total Payment $593
       

Savings

Interest Deduction $       0 Interest Deduction $ 100
Tax Deduction $       0 Tax Deduction $   60
    After Tax  
Net Monthly Payment $1,030                                  Net Monthly Payment $ 433
 
Also, check out this link if you want to calculate your own rent vs. own scenario.
 

*Determining how much of your tax and interest is deductible is a very complex process that is different for everyone. Some factors include the amount of your loan, how long you have owned your house, and how much you make, but there are many more factors to determine your deduction.