Should You Rent or Buy?
One of the biggest questions asked in housing is whether it’s better to rent or buy a home. Based on market conditions this answer can change, so it’s handy to use a rent vs. buy calculator to do comparisons.
But you should also know how rent vs. buy calculations actually work so you can feel confident in deciding what’s right for your budget and your family. Here are two easy ways to do this.
The first thing you need to understand is how rent vs. buy math works for you personally. You do this by calculating the monthly costs of home ownership, subtracting tax benefits, then comparing the final figure to the rental cost of a similar home in the same neighborhood.
Let’s assume you have a credit score of 750, and a $300,000 home purchase price (4 bed, 3 bath, 2368 square feet) 10 percent down (that’s $30,000) for a 30-year fixed mortgage in Maple Grove, MN.
With a mortgage calculator you will find your payments as:
Mortgage payment of principal and interest
|
$1,175
|
Property taxes
|
$300
|
Private mortgage insurance
|
$133
|
Homeowners insurance
|
$67
|
TOTAL monthly housing cost
|
$1,675
|
Finally, you compare this estimated after-tax housing cost of $1,386 to market rent for a comparable home in the same city. Be sure to compare properties of the same size, quality, and location to ensure your analysis is accurate.
For example: A house in Maple Grove, MN (4 bed, 3 bath, 2368 square feet) for rent is $2,150
You would save $475 if you were to buy instead of rent.
Do you want more information on what you can get pre-approved for? Contact Maria Jondahl with Marketplace Home Mortgage, our preferred partner.
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