Renting vs Owning

Renting vs. Owning

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IntroductionHousing Is the Largest ExpenditureAbout 1/3 of a persons income

Places to LiveHouse, Apartment, Condo, Duplex, Mobile Home, etc.

Two OptionsRentOwn

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Renting TerminologyRentThe cost of using someone elses propertyTenant (Renter)The person who rents the property LandlordOwner of the rental property

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Why Rent

Cant Afford a Home

Short-term Housing Option

Do Not Want to Own Home

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Advantages of RentingLess ExpensiveNo down paymentCheaper monthly paymentFixed monthly expensesShorter commitmentLittle maintenance or repair workExtra amenitiesUtilities may be included

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Disadvantages of RentingSubject To Lease TermRent may change with little noticeLess privacy and transient neighborsRestrictions on noise level Fewer decorating optionsNo equityNo tax deductionsProperty could be soldNo Pets

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Home Ownership TerminologyHome ownership Buyer has purchased a housing unit as propertyEquityCurrent market value of a home minus the outstanding mortgage balance Down paymentAmount of money paid on the home at time of purchase 10 20% of the purchase price of the homeCollateral Item promised to the lender if the borrower does not pay back the loanUsually the home

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Home Buying FactsMortgageHome loan90% of buyers take out a mortgageLargest financial decision

Recommended purchase price 2 times their annual household income

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Advantages of OwnershipBuild Equity Use as collateral for other purchasesPride of ownershipMore privacyLarger living space and storageImprove credit ratingInvestment Free to make home improvements PetsIncome tax deductions

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Disadvantages of OwnershipLarge down paymentMove-in costsInsurance costsCommitmenttime, money, and energyRepair and maintenance costsProperty taxes can raise substantiallyMoney is tied up in the homeRelocatesell time unknownPossible for property to decrease in value

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Reasons for Making a Housing Choice$$Personal and financial goalsPersonal values, needs, and wantsCredit historyReal estate pricesLocation preferenceExpected length of stay in particular place

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Costs of RentingMonthly rentSecurity depositAdvance payment to cover anything beyond normal wear and tear on the unitUtilities Electricity, Gas, Water, Trash Pick- up, etc.Renters insurance (optional)

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Costs of OwnershipMonthly mortgage payments Down payment (one time cost)Closing costs (one time cost)Utilities electricity, water, garbage, etc.Homeowners insuranceReal estate property taxesMaintenance

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