Apartment for rent vs buying your own house to stay. I have read so many arguments about advantages and disadvantages of buying vs renting. I started looking for a place to buy when I got my first job. One of my co-worker referred me to an realtor.
I started reading few book on buying home, mortgage process, cost of buying a home and so many other calculations. But, I was sue of one thing. Buying home will save tons of money in long run.
Why Home Ownership Saves Money?
I have very simple logic and calculation behind this. For example lets assume rent for a 2bed/2 bath apartment is $800 per month.
Buying $150,000 home, condo or townhouse for 5.5% APR, 30 Year Fixed mortgage will have monthly payment of $850.
Lets say you rent an apartment for 2 years. At end of 2 years you should have paid 24*800 = $19200 as rent. Now, lets face the reality. $19,200 is gone, its not in your savings. You just gave it away for using the apartment to rent.
For the same period if you were to be staying in your own home making $850 per month payment, at end of 2 years you will have paid 24*850 = $20,400.
If you sell the home after 2 years without home value appreciation, you get that money back. That $20,400 savings in 2 years. If home value appreciates 4% per year, then you make additional $12,000 in profit. Also, you do get tax deduction on mortgage interest payments.
What if home value depreciates?
Well, if the home value depreciates by 8% you still end up saving more than $7,000 or so, since for rent you will have paid $19,200.
I have said an overview of saving money by buying home, instead of renting. In coming weeks, I will write in detail about Mortgage, home ownership, true cost of home ownership, …
If you have any questions, leave a comment here.
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