Rent Versus Buy – The Real Cost of Renting!

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Being in real estate I hear Realtors talking all the time that it’s better to own than rent.  I know that the general population thinks we say that just ’cause we want to sell more houses.  So let’s take a REAL LOOK at why it is better to own than rent.

Set the stage:  The average price (mean) of a home in San Antonio, Texas is $156,000.  Given 30 years at 12 monthly payments on an FHA loan at 3.85% (today’s market rate for outstanding credit score) compared to a rental payment of $1250 (including rental insurance).

Using my handy dandy rent v. buy calculator I get the following results in a full comparison:

Estimated Savings with Ownership vs. Renting
Number Of Years To Compare:   10
Concerning Rent: (Scenario One)
Rent Amount Per Month:   $1,200.00
Monthly Renter’s Insurance:   $50.00
Concerning Home Ownership:
Purchase Price:   $156,000
House’s Appreciation Rate:   1%     (very conservative rate)
State & Federal Tax Rate:   .25%  (federal income tax rate varies)
Loan Amount:   $150,540.00
Interest Rate:   3.85%  (today’s rates for prime credit scores)
Number Of Years:   30
Discount Points:   0%
Origination Fee:   1%
Other Loan Costs:   $1,000.00
Annual Property Taxes:   $4,200.00
Annual Maintenance Costs:   $1,000.00  (varies by owner)
Annual Homeowners Insurance:   $100.00
Selling Costs:   6%   (varies by Realtor)
Total Rent Per Month:   $1,250.00
Total Rent:   $150,000.00
Monthly Principal & Interest (PI):   $1,063.74
House Total:   $140,154.67
Selling Price:   $172,321.05
Total Tax Savings:   $235.36
Equity At Time Of Sale:   $54,324.51
Money Saved Through Home Ownership:   $38,760.61

Owning a home would cost $48,605.94 less than renting.


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