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IS IT CHEAPER TO BUY OR RENT A HOME?

DOWN PAYMENT:
In most situations, lenders will require you to deposit 10-20% of the purchase price in order to get approved.

MORTGAGE INTEREST RATE:
The cost of borrowing money the highest it’s been in more than 20 years, at just over 7%.

PROPERTY TAXES:
This ranges from 0.3% if you’re in Hawaii to as high as 2.5% per year if you’re in New Jersey.

INSURANCE:
According to Bankrate, the average home insurance costs $1428 per year for a $250,000 home - but, when 66% of homes are said to be underinsured, expect that you’ll pay more like $2200 for a proper policy.

REPAIRS AND MAINTENANCE:
Over the long term, it’s recommended that you budget 1-2% of the property’s value, every year, for doing these normal repairs.

RENTING A HOME:
This is fairly easy to calculate: The price you pay is the price you pay - there’s really nothing fancy about it. However, according to a new analysis, in all but 4 major US Cities - renting is cheaper than the cost of buying.

After doing the math, here are the overall stats:

If you intend on living in your home for less than 10 years, then renting is likely the cheaper option. If you want to manage your cashflow without coming out of pocket a sizable amount of money, then renting is better. The same also applies if you want the flexibility to move on short notice.

However, if you plan on living in the same home for MORE than 10 years - buying is typically the better choice. If you want to remodel or upgrade your home - buying is better. And if you want to lock in your payments to invest in the area - buying is better.

My personal preference is that - if you’re going to buy something, get something that needs work, fix it up so that it’ll be worth more than what you paid - and then, use that as a buffer so you won’t come out of pocket in the event you need to sell on short notice.

Every situation is different and every area will have slightly different numbers - but, for the most part, this rule of thumb should hold true.

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