Rent vs. Buying a house

Elsewhere

I have started thinking about buying a house again. Something that drives me NUTS is the fact that I can't seem to get a straight answer out of anyone as to whether or not owning a house would be financially better than renting an apartment.

Things to take into consideration:

How much I pay in rent.
How much rent increases each year.
How much I pay in renters insurance.
How much a mortgage would be.
How much PMI or an 80 / xx mortgage would be.
How much I would have to take from or borrow from my 401Ks and IRAs for a down payment.
How much I will have to pay in penalties for taking money from my 401Ks and IRAs.
How much money l will loose by not having that 401K money earning interest.
How much maintenance on the property will cost.
How much insurance will cost.
How much I will be paying in property taxes.
How much in "freebies" I will get from the seller (They will pay $xxx in closing costs if I use their mortgage company).
Other crap I haven't thought of yet.

It seems like everyone I talk to has their own agenda and they all give me different results based on they want me to do so they will get more money from me.

ferret

I say buy. If you rent you are making somebody else rich. If you can afford it buy, it is an investment that keeps growing. Real estate always increases in value.

Lady Lee

I think you need to sit down and answer those questions for yourself. Perhaps a third party that doesn't have a $ agenda. (which is probably why you posted this).

I have been married twice to men who hated to fix anything. Hated to mow the lawn or shovel the snow. it drove me nuts. If you're going to invest in a home then you should keep it decent looking. I would up on the roof of the first house laying shingles. In the second house I did as much as I could for as long as I could.

My thoughts on buying vs reneing is that if you can get a good deal and know how to do a lot of the maintenance work yourself then go for it. Why spend your money on someone else's place and then fight with them to get repairs done. makes no sense to me unless buying is out of the question.

Scully

If you buy a house:

you are building up equity - that means, in 5 years, the house will be worth more (due to rise in property values) than what you are paying for it - if you turn it over into a new mortgage on a different house, you'll gain the value the house has earned
it's an investment
eventually, you will own it (and won't have mortgage payments anymore)
there may be some tax benefit (mortgage interest tax deductible? they don't do that in Canada, so I'm not certain about that)
any repairs or remodelling usually maintain or increase the value of the property

If you rent:

you're basically pi$$ing your money away - PERIOD

lovelylil

Hi there,

I worked in mortgage financing for several years and have a background in financial investing. Here is my best advice:

The best thing you can ever do to build a financially secure future and your net worth is to buy a home. You can pay rent forever but you will never own your apartment. Homes, even during a slow year normally appreciate in value. In my area, my home has gone up over $100,000 in value since I bought it only 4 years ago. Your mortgage interest is deductable on your taxes every year which means you will get more money back. You will have more leverage if you need to borry money and you will have the security of knowing you have a place to live that is secure.

There are many financing options available but if you can put down 20%, that is your best bet. You will not have to pay PMI. Some banks will drop the PMI if you put down only 10%, so whop around. You will get the lowest rate available, providing your credit is good. You will only be penalized 10% if you take the money out of your pension to buy your first home. You do not have to pay the 20% federal withholding tax in this situation. The best mortgages are fixed. Under NO circumstances should you get an interest only mortgage. These are very financially risky. If your home does not appreciate enough to lock in a fixed rate at the end of the interest only term, you will loose your home. The banks will try to tell you that you can get more home for the money, but this is a lot of bull. You do not want MORE home for the money, you want a home you can acutally AFFORD. If you can swing it, get a biweekly payment and you will pay off your home in 20 years rather than 30. Or, you can pay one extra payment per year. I always pay more and my home will be mine in only 15 years instead of 30.

Make sure when you look to buy that you take everything into consideration. You will have to pay the mortgage, insurance, water, and repairs. Can you really afford it? only you can answer that. A typical way to figure out how much home you can really afford is that the home and related expenses should be between 26% and 36% of your monthly gross income. Not much more, or you can be in trouble. Also shop around for closing fees because the fees are different depending on the mortgage broker. Always get a lawyer. And one more thing, if you can, contact a buyers agent before looking for a home. He will have your best interests at heart and works for you, not the seller. Any other questions, feel free to ask. Hope this helps. Lilly

outoftheorg

Usually property is a good investment in itself.

Almost all of the costs for insurance etc. when you own a house,are also there if you are renting.

Property can increase in worth just like 401k's also,there is some risk involved as either one may become a loss.

But I believe that property is more stable.I also believe that a retirement fund is necessary and important.

The hard point is finding property at a good price and that is in a location that will see an increase in the value of this property as time goes by.

If you can find the right realtor or better yet an investment counselor they may be of some help.

I have never lost money on any property I have owned. It was always worth more than I paid for it after a few years passed.

Outoftheorg

TresHappy

Renting has its perks - if you totally hate doing any type of repairs, it will be done for you. If you buy, you can put the hole in the wall and not have to worry about getting your security deposit back. I rented for over a decade until my marriage and I see both sides. In the end - buying is better because you have an investment.

Odrade

Elsewhere, from everything I've read from financial advisors, it's unwise to take $$ from your 401k or other retirement income to buy a house. Yes, buying a house is an investment, but it is one that is seldom realized on the primary residence. Buying a house is a forced savings plan if you are undisciplined, but if you have the willpower to stick to a budget, renting can also have advantages.
My husband recommends a book called "The Wealthy Barber" as a starting point for determining which one is to your best advantage. Good luck! Every spring we get the bug to flip the house and buy another... commonsense keeps us put for another year though.

sass_my_frass

Think long-term. I calculated that after the interest on the home loan I was better off renting for up to nine years than buying a place. A house isn't a short-term money winner, it's the kind of thing that pays off after many years of capital gain. If you want to do well out of one, look for the worst house in a good street and do it up as you have the time and patience. Beware of houses that are built to rot.

AudeSapere

I bought my first home when I was 27. I was still in the borg and a single woman. (Yes. I'm a little bit of a rebel... ) Regular pioneered for two years before that...

It was the BEST financial decision I've ever made.

January this year I sold it for a very nice profit and moved into a wonderful neighborhood with a fantastic view. Home equity is a great possession.

-Aude.

Rent vs. Buying a house

Share this