Last Train to Clarksville

Mortgage Loans ~ Buying vs. Renting By Amanda

This is a common question asked by potential homebuyers.  Is it safer to rent a home instead of buying a home?  Well, ultimately, that is a question that can only be answered by each individual person.  However, each person must be informed and educated as to the differences. 

If you rent a 3 bedroom, 2.5 bath home with around 1600 square feet, what will you pay in rent?  After making a few calls to some rental agencies, I came up with anywhere between $850 and $1200.  It really depends on the age and condition of the home.  So, let’s look somewhere in the middle and base our numbers off of $1000 per month rent.  So, over a 12 month period you have paid the owner of the home $12,000 out of your pocket.  There are no tax deductions for you and you do not own the home.  You would also want to insure the contents of your home by getting renters insurance.  That will run you around $20 per month.

If you purchase a home for $150,000 using your VA eligibility you will finance $153,225 if this is your first time to use your VA.  Based on an interest rate of 6% your principle and interest payment would be $919.35 per month.  Now, you still have to consider property taxes and homeowner’s insurance.  A good estimate for property taxes based on this amount should be about $135 per month.  Homeowner’s insurance should be around $45 per month.  Both of these items will be included in your monthly mortgage payment.  So, your total estimated mortgage payment would be $1099.35. 

Renting would be a cost of around $1020 per month and buying would be only $80 more per month based on these figures. 

Here are some benefits to homeownership:

In some cases you can buy a home with no down payment compared to paying 1 month rental deposit and first months rent.

You would need around two months of rent up front when renting a home.  When buying, you don’t make your mortgage payment until a month after you buy it.

Your monthly interest paid from your mortgage payment is tax deductible.

Typically your house will increase in value over time building your equity in the home.

You are investing your money in something you own….not in your landlord’s pocket.

Be sure and check with your bookkeeper or accountant regarding other possible tax deductions involving homeownership.

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For more information on Mortgage Loans & Options, please contact Amanda Dusenberry.

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