As promised, Rent vs. Buy is the topic at Lezamiz Real Estate Co. this week. We are going to look at renting, and some of the costs you can expect when living in a rental. Also, we will examine the pros and cons of renting. Then, using home prices based on a current median price for homes in Twin Falls, ID, we will look at the approximate monthly cost faced when buying a home.
Rent
Currently in Twin Falls, a three bedroom, two bathroom home with a two-car garage is renting for around $900/month. Many landlords will ask for first and last month’s rent, which gives you, as the tenant, an $1800 cash expense up front. If you have pets, there may be an extra deposit asked for- say, $100 per pet, and an additional $25 per pet for rent each month. This increases your monthly expense to $925.00, most likely not including utilities expenses you owe.
There are no tax deductions for any interest a tenant pays while renting. As the tenant, you are making the owner’s mortgage payment for them each month.
Usually, tenants aren’t able to make many, if any, changes to the home to personalize it to their taste. In addition, if any repairs are required for the home, the tenant is at the mercy of the landlord, who may or may not pay the expense to fix the problem.
In some cases, the landlord may decide to sell the rental property, which takes away your security. You may need to go through the hassle and expense of finding a place to live as soon as the property is sold.
However, in some cases renting is a good idea for the short term if you fit into any of these situations:
· New to the area. While a family gets settled, and become familiar with the area, renting is a great idea.
· Need a short term place to live while building a new home
· Allows a person to “downsize” temporarily, in order to get finances back into shape and accumulate money for a sizable down payment when the time comes to purchases a home.
· Living in the area short term, or less than two years, because of work, school, or other conditions.
Buy
Now, let’s look at the benefits of buying a home. At this time in Twin Falls, ID, the median price for a three bedroom, two bathroom, two-car garage home between 1400-1600 square feet is $162,400. You might be thinking it is out of your price range, but keep reading!
Let’s take a look at what it would take to leverage your monthly rent and put it to work for you in buying a home. Currently the interest rate for a 30-year fixed rate mortgage is approximately 5.4%. You would need a good chunk of money saved up, so you can put at least 5% down on the house, or about $9,920. You should expect a loan about of approximately $152,480. In today’s market, the seller has been willing, in most cases, to pay your closing costs and prepaid expenses. This amounts to a savings to you of about $4800. Property taxes on this home would be approximately $1400 per year, and you also have Homeowner’s Insurance that would be about $450 yearly. Based on these figures, your total monthly payment would be $1010.22. What this means is that for $85.22 more each month, you could be buying a home instead of renting.
Another great benefit of home ownership is the enormous tax savings you receive when you file your tax returns. Given the assumption that you would be in the 28% tax bracket, in this scenario, you would expect a tax savings of about $2665 per year, or $220 each month. This would more than make up for your monthly increase of $85.22 each month to buy a home. In fact, you would have a net decrease in your monthly expenditures if you owned your house! You would be building YOUR equity, instead of having nothing to show for it at the end of the month.
Why not explore buying a home today? You might be surprised at what you find out, as you visit with our buyer specialists. Give Lezamiz Real Estate Co. a call today at 208-734-7007.
PLEASE NOTE: No figures presented are exact. These are meant to be an estimate for example purposes only, and are not an exact quote for a rental or a loan.