Rent or Buy - the cost is going up
If it will cost a person more whether they rent or buy, the conclusion can be made that one way or the other, they will pay for the house they occupy. The question will be whether they buy it for themselves or their landlord? Will they benefit from the equity build-up and the appreciation?
The following analysis looks at a $200,000 home that can be purchased with a 30 year FHA mortgage at 4.3%. The assumption uses 3% appreciation and tenant currently paying $1,750 a month in rent.
The house payment, principal, interest, taxes and insurance would be about $1,609 a month. However, once you consider the benefits of the principal reduction each month, the appreciation and the tax savings and the increased cost of maintenance, the net cost of housing is closer to $630 per month.
Even if you ignored the tax savings, the net cost of housing would only be $919.06 per month. The tenant would pay considerably more to rent than to own the home. Over time, the decision to buy a home could result in a considerable financial asset that the tenant will not benefit from.
To estimate your cost of housing, use the Rent vs. Own.
To purchase your next home call Coni Otto of Long and Foster - I would be happy to help you purchase your next home in the DC Metropolitan area. My office is in Burtonsville, MD but I travel all over Maryland and the District of Columbia. Call today for your free consultation, Cell: 240-483-7556 or Office: 301-384-8700