Is it better to buy a house or to rent?

J

Joeman

Eviiiiiiiil Clown
Registered Senior Member
I have been thinking about buying a house last 6 months. The interest rate is 4 decades low. Here is sort of my cost analysis. I assume the house cost $150,000 and I pitch in 25% down payment.

cost to buy a house

House Cost.......................$150000.00
subtract 25% Down payment
---------------------------------------------------
money need to borrow..... $112500

which translates to interest payment of $112500 * (0.07) = $6750 / year (assuming interest is 7%)

Total Cost Per Year

Interest................$6750
Property Tax.........$4000
Home Insurance...$720
Misc......................$500
----------------------------------------------
Total.....................($11970)

Now assume annual value increase of 4% (national average)

Value increase........+$6000
Tax Deduction.........+$4000
---------------------------------------------
Total....................(+10,000)

Annual Cost $11970 - $10,000 = ($1197)

The rent I pay annual for my apartment is ($6000). According to my calculation, there is a saving of almost $5000 annually. How much saving really is a function of interest rates, % down payment, and proper value increase.

I hope you guys can follow my calculation. I don't know if there are flaws somewhere in my thinking.

so it appears to be cheaper to buy a house than to rent. However, if I don't live in the same house for very long, I have to pay a lot of money for a realtor to sell my house plus going through all the hassel. If I have to pay a realtor $10,000 to sell a house and I end up living in the same house for less than 2 years, it doesn't seem to be worth it.
 
well the common accepted standard is that owning property is about the best financial move you can make. Also, you get tax breaks for owning a house don't you? not to mention a better credit rating.
Check out the area where you plan to buy and whether the houses have been appreciating.

Obviously theres more things to consider than this. but its a start.

...and don't use a realtor!
 
Originally posted by lotuseatsvipers
Also, you get tax breaks for owning a house don't you?

...and don't use a realtor!
Click to expand...

tax breaks is already included in my calculation.

if don't use a realtor than use what? If it is cheaper to use a realtor than it makes sense.
 
One of the only problems I see with not using a realitor is that and abstract is required to be done. This requires a license in most states. It may be that you can get the realitor to do only the abstract and handle the rest yourself.

Most loans require a house inspection, an abstract, the checking of backdue taxes, propertly lines by surveyour, and a few other items.

If you stay in a place for 5-10 years then it is worth it for the tax breaks.
 
Originally posted by (Q)
Joeman

You're forgetting one important factor; equity.
Click to expand...

Doh!!!!!!. I can't believe I am over-analyzing things and forget about something simple.
 
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