Being in real estate I hear Realtors talking all the time that it's better to own than rent. I know that the general population thinks we say that just 'cause we want to sell more houses. So let's take a REAL LOOK at why it is better to own than rent.
Set the stage: The average price (mean) of a home in San Antonio, Texas is $156,000. Given 30 years at 12 monthly payments on an FHA loan at 3.85% (today's market rate for outstanding credit score) compared to a rental payment of $1250 (including rental insurance).
Using my handy dandy rent v. buy calculator I get the following results in a full comparison:
| Estimated Savings with Ownership vs. Renting |
| Number Of Years To Compare: | 10 |
| Concerning Rent: (Scenario One) |
|
| Rent Amount Per Month: | $1,200.00 |
| Monthly Renter's Insurance: | $50.00 |
| Concerning Home Ownership: | |
| Purchase Price: | $156,000 |
| House's Appreciation Rate: | 1% (very conservative rate) |
| State & Federal Tax Rate: | .25% (federal income tax rate varies) |
| Loan Amount: | $150,540.00 |
| Interest Rate: | 3.85% (today's rates for prime credit scores) |
| Number Of Years: | 30 |
| Discount Points: | 0% |
| Origination Fee: | 1% |
| Other Loan Costs: | $1,000.00 |
| Annual Property Taxes: | $4,200.00 |
| Annual Maintenance Costs: | $1,000.00 (varies by owner) |
| Annual Homeowners Insurance: | $100.00 |
| Selling Costs: | 6% (varies by Realtor) |
| RESULTS | |
| Total Rent Per Month: | $1,250.00 |
| Total Rent: | $150,000.00 |
| Monthly Principal & Interest (PI): | $1,063.74 |
| House Total: | $140,154.67 |
| Selling Price: | $172,321.05 |
| Total Tax Savings: | $235.36 |
| Equity At Time Of Sale: | $54,324.51 |
| Money Saved Through Home Ownership: | $38,760.61 |
Owning a home would cost $48,605.94 less than renting.
| Notes: | This data is for informational purposes only and accuracy of the figures hereinafter set forth is not guaranteed. The actual costs with respect to each transaction will vary depending upon the circumstances. |
A you can plainly see, that owning a home is a more financially savvy way to manage your money. It gets even better over time - say 30 years.
THERE ARE OTHER (NON FINANCIAL) BENEFITS TOO!
- You get to decorate however you want!
- You get to own whatever pets that you want!
- You get a pride of ownership & accomplishment!
- You get a more stable life!
- You save money not moving every 12 months by not moving, again!
- You get a sense of community!
So what's stopping you from calling me today?
A note from Cathy Bureau - I received several comments regarding the assumptions that I made and a few errors. I went back and made an adjustment for insurance ($100/mo not year), 25% instead of .25% on federal tax savings, $7500 for closing costs on the acquistion, and $3,000 per year for maintenance (grossly high but to address some comments). I' leaving the appreciation at 1% per year, again, to be very conservative for my neigh sayers. The revised savings is $40,390.47 cheaper to buy than to rent. The bigger picutre, however, is that if you can stay put for 30 years the savings is a whopping $148,190.5
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