So Should You Rent or Buy????
People are always asking me, should I continue to rent or should I buy? Well, the answer isn’t as obvious as it once was. Two years ago or more I would have said, “Are you kidding? Of course you should buy! Why? You will build equity in your home, you write off the loan interest and taxes so instead of possibly paying the IRS at the end of the year you actually may get a refund!"
However, in the past 36 months our housing market has changed; values have plummeted, taxes have stayed level or gone up in more cases than not so they buy vs rent dilemma has become more complex. However, mid 2013 is looking more optimistic and I seeing more buyers coming into the office.
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It has been a long time, if ever, that a “Buyer’s Market,” AND a “Renter’s Market” has descended upon us simultaneously—but that is the case now. We have a renter’s market because there are so many empty homes, making rents fairly reasonable. We have a buyer’s market because values have plummeted! So what’s a person to do?
Well, if your rent is ridiculously low and you love your location and the home/apartment/condo you are renting, then by all means, continue to rent!
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However, if your rent is marginally close to what a new house payment is (or if your house payment would be 30% or less MORE than your rent) then you may want to consider home ownership. Buying has tax breaks, renting does not. Also, remember that when comparing “rent” to house payment you have to compare: Principle, Interest, Taxes and Insurance + Home Owner’s Association payment if any VERSUS rent payment.
I did find a good calculator online that you could use to help in making this determination. Check this out: Michael BlueJay has come up with a calculator that will help you determine some way of helping you through the rent versus own jungle.
The ULTIMATE Rent vs. Buy calculator
Which is better, renting or buying? In most cases, it’s better to buy a home than to rent. Renting is better only if your rent is very low, or if you plan on moving in a few years. This calculator will tell you which way is better for your particular situation.
Here’s a very handy rule of thumb I came up with: Just multiply your monthly rent by 240. If you can buy a house for less than that, then buying is usually better in the long-term.
There are lots of rent vs. buy calculators on the net but I found most of them confusing, hard to use, or woefully incomplete. So I set out to make the ultimate rent-vs.-buy calculator, which would be easy to understand, easy to use, have every field explicitly defined, and provide both a really useful summary as well as detailed year-by-year data. Here’s why I think this calculator is better than the rest:
• Includes sample values so you can see a comparison right away
• Automatically calculates PMI, closing costs, taxes & insurance, and maintenance based on the purchase price
• Automatically recalculates when you change any value
• All input and results are shown the same page
• Shows you the results year-by-year (not just at the end of the mortgage term)
• Shows results for a full 40 years into the future
• Shows the value of each of 19 different variables, for each and every year
• Built-in help for every input field
There’s no other calculator on the net that does all this. Try this out and let me know what you think? Your comments are welcome! Go to http://michaelbluejay.com/house/rentvsbuy.html Also contact me at 847-362-1335 If you are looking for a home mortgage in Illinois or Wisconsin, do e-mail me at jloangoddess@aol.com and I will be happy to help you!
If you are considering relocation and you are stuck trying to decide if you should rent or buy, Mint.com may have information that can help make that decision clear! I am always looking for simple money-saving tools to share. If you have any questions or something we should share, please email me @ JLoanGoddess@aol.com
