As a Realtor in Fairfield County CT, I encounter many people curious about the real estate market who ask me - "What are the benefits of buying vs renting"?" So I took a moment to chat with a local loan officer and we put these thoughts (and numbers) together for your consideration....
Rent or Buy: What $2,500/month will get you.
There are positives to buying and renting your home. With renting, you have the freedom of leaving after your lease has ended. You also have the convenience of calling a landlord when there are issues with your home. With buying, you have the ability to get a tax deduction and gain appreciation on the home when prices go up.
There are many positives and negatives to each, but here is an explaination of the differences of similar homes, and where the money goes monthly.
For example, the rent in Stamford, CT in one of the newer rental complexes, for a 2 Bedroom 1.5 bath is about $2,500/month. There are several factors that can increase or decrease this amount. Still, $30,000 a year is going toward rent with no ownership. Let’s compare this to similar property that you can own.
There’s a 2 bedroom, 1.5 bath Condo in the River Run complex in Stamford. Square footage is 1,100 square feet. The purchase price is roughly 285k. Your monthly expenses can be broken out below.
Purchase Price: $285,000
Down Payment: 28,500
Loan Amount: 256,500
Total Housing payment
Principal and interest payment: $1,188
Taxes: $350
Condo insurance (HO6): $50
Monthly Common charges: $325
Private Mortgage Insurance: $137
Total monthly housing: $2050
The above scenario is based on current market rates, roughly 3.75% on a 30yr fixed. Private mortgage insurance is required on loans when you are financing more than 80% of the value of the home. Other qualifying factors are considered in pricing and eligibility.
It’s actually cheaper to own than to rent with the above example. You’ll have the benefit of writing off the mortgage interest which is about $9,300 the first year. You can also write-off the yearly taxes of $4,200 if this is your primary residence. That’s a total of $13,500 in tax deductions. In addition, you would’ve paid off around $4,700 of your mortgage. Please note that this doesn’t even take into account that you’ll be saving $450/month or $5,400 a year from the lower monthly housing expense! Can you say "cha-ching?"
There are reasons why someone should rent, such as a temporary job assignment or plans of relocating. But the housing reports show that home prices are starting to improve. This, in combination with the historic low mortgage rates, make now an ideal time to get into home ownership and stop throwing away $30,000/year toward rent.
I’ll be more than happy to show you some homes in the area that are comparable to what you’re renting. If you'd like to begin your search on-line, just click here to search for homes in Fairfield County. Or if you are interested in learning more about our local real estate market, consider liking our Real estate Facebook page and liking it. We post monthly market reports for the inside scoop in real estate.
I highly recommend that you also take the first step in home ownership in speaking to my trusted Sr. Mortgage Specialist, Jay de Castro. He can provide you with mortgage options and help qualify you for your new home. You can call/text him on his cell of 203.962.3278 or visit him on his website, www.jaydecastro.com, to get pre-qualified.
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