Thinking about Owning vs. Renting a Home?
Is it time to stop renting? With new business moving into the Greater Seattle area the rental market is getting pretty tight. What does that mean to you as a renter? Rents are going up and will continue to do so. Are you feeling the pinch? Is now the perfect time to buy a Seattle area home?
How to Calculate the Cost Differences
The first thing to do is to determine if it makes financial sense to own vs. rent. It is important to understand that there are are different costs and benefits associated with owning versus renting. To simply compare the monthly payment is not enough. To calculate the real differences, you need to dig a little deeper. For instance, in this example in this New York Times article, a $250,000 home was used as their example for a 9-year period, with a 30-year fixed 4.34% loan and a 20% down payment. Added to that they factored in taxes, maintenance and fees (including estimated closing costs). The result was a monthly cost of $961. So to determine if buying or renting is better, if you can rent a similar home for less than $961/month it may be rent – this is assuming the rent remains the same for the nine years, which is highly unlikely.
Feel free to change the amounts in the calculator by moving the sliders so you can put in your own real numbers. Understand that your credit score and history have a direct impact on your interest rate and loan amount so the chart to the left and the calculator don’t necessarily reflect this. It is always best to contact a mortgage professional to help you make the correct value and payment determination. Remember too, that there are extra fees associated with renting as well, such as; broker fees, security deposits, renters’ insurance and pet fees, among others things. There also is the expectation or potential for rent increases at the end of each lease period.
Benefit from Home Ownership
A big benefit of home ownership is the potential to reduce your income tax burden. A portion of your mortgage interest may be deductible as well as some of the points and property taxes.
What Other Costs of Home Ownership Should You Know?
There are costs associated with home ownership that you need to consider as well. Before buying, talk to us about some of the additional costs of home ownership. Home maintenance can be costly – we can help you estimate maintenance expenses such as a new roof or heating and air-conditioning system. Let us help you budget for your new house, so we can factor in what you’ll need to in order to set aside enough money to cover these expenses.
Another thing to consider are that taxes, levies for schools, roads and community improvements and other municipal costs can increase even in your first year of home ownership so when calculating what you can afford, add in a little extra for taxes too.
Don’t forget that if you purchase a condominium or a home that is part of an association, you can expect association dues to rise annually. Special assessments are common when there is not enough money in the budget to maintain the property and repairs need to be made. Insurance premiums tend to go up each year as well. Consider these extra items as part of your overall housing cost.
Other expenses to figure into your budget:
- Lawn and garden care—including extra water costs if you have large grass and flower areas, equipment and fuel or landscaping services, new plants, mulch and fertilizer
- Insurance deductibles—if a hailstorm damages your roof, your insurance will replace it, but you’ll have to come up with the deductible to get the job done
- Liability insurance—as the homeowner, if someone is injured on your property you’re responsible. You’ll need to make sure your homeowners’ insurance includes liability.
Be prepared for a long-term commitment
Buying a home is a long-term commitment. Think about all the costs your landlord is responsible for and recognize that as a homeowner you will now be responsible for them . Let us partner with you to make sure you’re able to both keep and enjoy that commitment. Call us today to help you prepare for moving from renting to owning … and live the American dream!
Is it time for OWN your own home?
Are you interested in buying a home? Stay on top of the market! We can send you real-time listings of area homes as they come on the market – find out how. Want to find out what your home is worth? Request a FREE Market Analysis TODAY! Contact the Knowles Team TODAY at (206) 588-8418 to discuss what is happening in today’s Greater Seattle area Real Estate Market. The Knowles Team will be happy to give you a personalized Comparative Market Analysis for your home or assist you in purchasing a home.
