Buying vs. Renting a Home
Is home ownership right for you?
Before making a hasty move, review the details and make the financial decision that is right for you. While owning a home may be beneficial for some, many people find renting to be a better option. There are plenty of examples that show how renting can save consumers a considerable amount of money. However, the decision to rent versus buying a home is purely a personal choice.
Chart Courtesy of Ginny Mae
||Property builds equity
Sense of community, stability, and security
Free to change decor and landscaping
Not dependent on landlord to maintain property
|Responsible for maintenance|
Responsible for property taxes
Possibility of foreclosure and loss of equity
Less mobility than renting
||Little or no responsibility for maintenance
Easier to move
|No tax benefits|
No equity is built up
No control over rent increases
Possibility of eviction
If you decide to buy a home, your income, savings, and monthly expenses play an important role in determining how large a mortgage you can afford. To figure out the amount you can afford, use a mortgage calculator.
In many cases, the amount of money a renter spends on rent can be about the same as or less than the amount a homeowner spends on a mortgage. With the tax benefit for homeowners, the savings can be significant.
Buy vs. Rent Comparison
The chart below shows a cost comparison for a renter and a homeowner over a seven year period.
- The renter starts out paying $800 per month with annual increases of 5%
- The homeowner purchases a home for $110,000 and pays a monthly mortgage of $1,000
- After 6 years, the homeowner's payment is lower than the renter's monthly payment
- With the tax savings of homeownership, the homeowner's payment is less than the rental payment after 3 years
||After Tax Savings
||After Tax Savings|
||Savings increase every year|
Monthly Expenses: Buying
Your rental company takes part of your rent payment to cover certain housing expenses. When you decide to purchase a home, you accept responsibility for paying for these expenses (listed below). They are additional costs to your monthly mortgage payment and should be included in your budget estimates:
Property Taxes and Special Assessments
Home Owner Association (HOA) Fee: Doesn't apply to all purchases. It pays for trash and snow removal and maintenance of common grounds if applicable.
Membership Fee: It may pay for recreational facilities and other services (e.g. cable TV).
HOME BUYING RESOURCES
Home-shopping Checklist - Take this list with you when comparing homes.
Read NCUA’s article on Home Ownership and Mortgage Options
Fair Housing: Equal Opportunity for All (brochure)
To learn more about buying a home, visit: