Renting vs. Owning Family Economics and Financial Education Take Charge of your Finances.
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Transcript of Renting vs. Owning Family Economics and Financial Education Take Charge of your Finances.
![Page 1: Renting vs. Owning Family Economics and Financial Education Take Charge of your Finances.](https://reader036.fdocuments.net/reader036/viewer/2022082817/56649e195503460f94b05aca/html5/thumbnails/1.jpg)
Renting vs. Owning
Family Economics and Financial Education Take Charge of your Finances
![Page 2: Renting vs. Owning Family Economics and Financial Education Take Charge of your Finances.](https://reader036.fdocuments.net/reader036/viewer/2022082817/56649e195503460f94b05aca/html5/thumbnails/2.jpg)
1.9.3.G1
© Family Economics & Financial Education – Revised March 2009 – Housing Unit – Renting vs. Owning a HomeFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Introduction
Housing is the largest personal expenditure.– About 1/3 of a person’s income.
Choosing where to live is based upon a person’s goals, values, needs, and wants.
Places to live include:– House, apartment, condo, mobile home,
etc.
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1.9.3.G1
© Family Economics & Financial Education – Revised March 2009 – Housing Unit – Renting vs. Owning a HomeFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Costs of renting
Security deposit Monthly rent Utilities – electricity, water, garbage,
etc. Renter’s insurance
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1.9.3.G1
© Family Economics & Financial Education – Revised March 2009 – Housing Unit – Renting vs. Owning a HomeFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Renting
A lease is a legal contract between the tenant and the landlord, specifying the responsibilities and rights of both parties.– Identifies the rent amount, security deposit amount
and specifications, payment for utility bills, late payment penalties, length of lease, eviction terms, etc.
– This is between the landlord and the tenant Landlord
– Owner of the rental property.– May perform management duties or hire a property
manager.
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1.9.3.G1
© Family Economics & Financial Education – Revised March 2009 – Housing Unit – Renting vs. Owning a HomeFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Renting continued
Tenant (renter)– The person who rents the property.
Renters are generally– People who choose not to own a home.– People who cannot afford to own a home.
The tenant pays rent to the landlord which allows them to live in the rental property. – Rent
The cost of using someone else’s property.
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1.9.3.G1
© Family Economics & Financial Education – Revised March 2009 – Housing Unit – Renting vs. Owning a HomeFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Moving into a rental
Upon moving into a new place, people are usually required to pay a security deposit and sign a lease.
Security deposit– An advance payment to cover anything
beyond normal wear and tear on the unit.
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1.9.3.G1
© Family Economics & Financial Education – Revised March 2009 – Housing Unit – Renting vs. Owning a HomeFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Advantages of renting
Low move-in costs Fixed monthly expenses Location choices (may be
close to work or school) Less maintenance and
repair work Fewer responsibilities
Typically less expensive than home ownership
May be able to save for other wants or needs if renting a less expensive apartment
Other expenses may be included in rent payment such as electricity, water, sewer, and/or garbage
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1.9.3.G1
© Family Economics & Financial Education – Revised March 2009 – Housing Unit – Renting vs. Owning a HomeFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Disadvantages of renting
Subject to terms of a lease
Rent may change with little notice
Less privacy and transient neighbors.
Restrictions on noise level, pets, etc.
Fewer opportunities to upgrade apartment such as new carpet, paint, or wallpaper.
When leaving a property, no equity is returned as it would be if selling a home.
No tax deductions May lose rental if the
property is sold.
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1.9.3.G1
© Family Economics & Financial Education – Revised March 2009 – Housing Unit – Renting vs. Owning a HomeFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Costs of ownership
Monthly mortgage payments Down payment (one time cost) Closing costs (one time cost) Utilities – electricity, water, garbage,
etc. Homeowner’s insurance Real estate property taxes Maintenance
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1.9.3.G1
© Family Economics & Financial Education – Revised March 2009 – Housing Unit – Renting vs. Owning a HomeFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Home ownership
Home ownership - the buyer has purchased a housing unit as property– Goal of many Americans– A large financial decision
Owning a home is an investment because if a person sells a home for more than what it was bought for, the person makes money. This is called equity.
Financial planning and savings can assist a person in planning for the benefits of home ownership later in life.
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1.9.3.G1
© Family Economics & Financial Education – Revised March 2009 – Housing Unit – Renting vs. Owning a HomeFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Purchasing a home
90% of buyers take out a mortgage– A home loan in which the real estate is the
collateral– Collateral is an item promised to the lender if the
borrower does not pay back the loan, usually the home.
Down payment– Amount of money paid on the home at time of
purchase – Typically 10 – 20% of the purchase price of the
home Recommended purchase price amount an individual
should pay for a home– 2 ½ times their annual household income
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1.9.3.G1
© Family Economics & Financial Education – Revised March 2009 – Housing Unit – Renting vs. Owning a HomeFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Advantages of ownership
Build equity which can be borrowed against if necessary
Pride of ownership Feel more
comfortable and have more privacy
Stable mortgage payments
More room and storage
Improvement of buyer’s credit rating
Income tax deductions for property taxes and mortgage interest
Potential for property to increase in value
Free to make home improvements and have pets (items typically not allowed in rentals)
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1.9.3.G1
© Family Economics & Financial Education – Revised March 2009 – Housing Unit – Renting vs. Owning a HomeFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Disadvantages of ownership
Large down payment Move-in costs Insurance costs Possible for property
to decrease in value Time, money, and
energy commitment Repair and
maintenance costs
Property taxes can raise substantially
Money is tied up in the home
May take several months to sell a home if trying to relocate