Raleigh, NC (PressExposure) April 12, 2011 -- "I mean we live in a nice apartment" he continued. "We have access to a pool and tennis courts. Something goes wrong; the landlord has to fix it. The house we are looking at has no pool or tennis courts. Something goes wrong, I have to fix it or pay somebody."
Max and Marco listened. Szymon had actually gone looking for a house, found one and now they were calculating their budget. It did look like renting was the better deal. Marco wondered where the topic would go.
"There are tax benefits to owning a house" said Max.
"Speaking of taxes." replied Szymon. "Owners have to pay property taxes and renters don''t. Insurance is another issue. Renter''s insurance is much cheaper than home owner''s insurance. Plus I''d have to mow the lawn"
"True. You can make a profit when you sell the house though. You only get your deposit back when you leave your apartment" said Max.
"Property values have been going down lately. It used to be a sure thing that values would go up. That is not true today" answered Szymon. Marco decided to join in. "That is the first time you mention the future. Before that, comments have been on today''s budget. I can''t address lifestyle issues like mowing the lawn. That is personal."
"What are you talking about, Marco?"
"Szymon, you are a young guy. Let us say, for the sake of discussion, that you will live another 50 years. Where are you going to live? How much will it cost? Looking at today''s budget is ok, but it is not enough. Let''s do a spreadsheet comparing the cost of rent vs. the cost of owning over the next 50 years. Assume rents will go up 3% per year. This will lend some perspective."
Szymon shared that he was paying $800 for rent. The principal and interest on the house would be $900. Marco created a spreadsheet. The $800 rent will gradually increase to $1,885 in 30 years. The mortgage payment doesn''t change. It stays at $900. Total savings of buying is $132,723.
At this point, Szymon owns the house free and clear. No more mortgage payments. Rent continues forever. Rents continue to go up. Total savings of owning over the next 20 years equals $626,125. So over 50 years, mortgage payments will beat paying rent by $758,849.
Marco agreed that comparing rent vs. own in light of today''s budget was a good idea. You must make sure you can afford to buy. Lifestyle issues need to be addressed too. He just wanted to Szymon to consider that rent is forever and the cost of renting will continue to go up.
Kathy Godin, Award-Winning Loan Officer and Branch Manager at Allied
Where people, not computer robots, answer the phone.
Serving North Carolina