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Should You Buy or Rent?

Last post Thu, Nov 22 2012 3:09 AM by Raven. 13 replies.
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  • Fri, Jul 27 2012 11:30 AM

    • Brandy
    • Top 10 Contributor
    • Joined on Wed, Mar 28 2007
    • Saving in South Mississippi
    • Posts 25,145

    Should You Buy or Rent?

    There was a time when buying was always best. An unstable economy, frequent moves to follow work, difficulties obtaining loans make that choice hard or less desirable.

    Should you buy or rent?

    Read more about it

    Deciding between buying and renting

    Shall we buy or rent?

    Is it time to buy a home?

    The Dollar Stretcher Community Manager



  • Sat, Jul 28 2012 9:50 AM In reply to

    • rolo
    • Top 50 Contributor
      Female
    • Joined on Wed, Apr 4 2007
    • Michigan
    • Posts 1,932

    Re: Should You Buy or Rent?

    Don't buy a home if you have other consumer debt--that is a recipe to turn the "American Dream" into the "American Nightmare".   Owning a home is never just the cost of the mortgage payment.  Home ownership is an ongoing expense of routine maintenance and repairs, appliance replacement, taxes that increase, increased utilities, etc.  Those expenses never "are done" or go away.  

    Best financial practice for home ownership: no consumer debt, save up a 20% down payment, purchase in the range of about 2-2.5 times your gross annual income, mortgage should be a 15 year, fixed rate conventional mortgage, including taxes, insurance, HOA fees that doesn't exceed 25% of your NET monthly incxome.  

    Using those guidelines allows you to pay off the house in a timely mamer, saving thousands of dollars in interest, and also allows you to invest 15% of your income into retirement savings, save additional amounts for home maintenance/repairs, and have money left over for vacations, etc.  You should never purchase a home and veiw it as a good investment.  Invest your money elsewhere.  If you sell, and make a profit, that's great--but don't rely on that.

     

    Lorrie

    "People take different roads seeking fulfillment and happiness. Just because they're not on your road doesn't mean they've gotten lost." ~~ Dalai Lama XIV -

  • Sat, Jul 28 2012 7:36 PM In reply to

    Re: Should You Buy or Rent?

    According to the situation I personallt think rent money is just money down the drain we rented for almost 7 years.  DH told me when we moved into the condo we would only be there for a year I agreed biggest mistake of my life had I known I would have been that long I would have skipped it do the math we paid 1400.00 to move in November 2005 then $700.00rent December 2005 so in 2005 we were out 2100.00 for  rental unit.  Then 2006-2007
  • Sat, Jul 28 2012 10:03 PM In reply to

    Re: Should You Buy or Rent?

     If it was rent fixed only charge a certain amount.  I own a town house I never rented anything before except when I had the deli also the rent was a certain amount permonth.

    chrissanne
  • Sat, Aug 4 2012 5:04 AM In reply to

    Re: Should You Buy or Rent?

    @rolo, this isn't the first time i've wondered if your last name is Ramsey. heh.

    DH and I put these principles into practice many moons ago, then later on we heard of Dave Ramsey.

    Very sound advice!

     

  • Sat, Aug 4 2012 8:28 AM In reply to

    Re: Should You Buy or Rent?

    It depends on the situation. My son that is getting married wants to buy a home, but I feel they should wait until they are sure of where they want to settle down and raise a family. Otherwise work or further college could take them away somewhere and then they'd be stuck with a home to try to sell.

    Michelle in Northern Michigan

    "Those who would surrender liberty for security deserve neither" - Ben Franklin

  • Sat, Aug 4 2012 10:06 AM In reply to

    • Brandy
    • Top 10 Contributor
    • Joined on Wed, Mar 28 2007
    • Saving in South Mississippi
    • Posts 25,145

    Re: Should You Buy or Rent?

    Cinnamonhuskies:
    Otherwise work or further college could take them away somewhere and then they'd be stuck with a home to try to sell.

    Statitstics say that people on average are no longer purchasing a home and remaining in it for years as it was once typically done. Many experts are saying the average is now five years for living in a home.

    For those that this number is true for, rent may not be a down the toilet truth. The amount of a down payment, repairs and the inability to sell the home may well make renting cheaper. If the market was not so upside and hard to sell in, this may not be true. It's worth keeping an eye on things even when you don't plan to sell or move anytime soon.

    The Dollar Stretcher Community Manager



  • Tue, Aug 7 2012 11:14 AM In reply to

    Re: Should You Buy or Rent?

    Brandy:

    Statitstics say that people on average are no longer purchasing a home and remaining in it for years as it was once typically done. Many experts are saying the average is now five years for living in a home.

    We just beat the average! We have owned our home for five years as of last June. We have been paying the principal down aggressively and expect to have the whole thing paid off in two more years at most. (We are currently debating with ourselves over when to go ahead and pay off the remainder; should we do it as soon as possible, or hold onto the cash in case of an emergency like a job loss? Paying it off right now would still leave us with more than 6 months' expenses in our emergency fund, but we are paranoid.)

    We did not follow rolo's "best practice" to the letter, as we started out with a 30 year mortgage, which gve us the flexibility to pay off the principal faster (with no penalty) if we so chose, but to still have a lower fixed monthly payment in case we ever needed it. After two years of paying down the principal as fast as possible, we refinanced to a 15-year mortgage at a lower interest rate, actually lowering our monthly payment in the process. Also, our initial mortgage payment was a bit more than 25 percent of our monthly income. After the refinance, we got the payment down to within the 25 percent limit, but it has crept over the limit again due to rising property taxes. That's the main argument in favor of "pay it off and be done with it"--then we will have only the property tax bill to pay each quarter.

     

    My Ecofrugal Living blog: ecofrugality.blogspot.com
  • Wed, Aug 8 2012 9:12 PM In reply to

    Re: Should You Buy or Rent?

      I just made an interesting discovery that sheds new light on the whole "buy versus rent" question. I checked Zillow.com to see how our home's value had changed in the past six months (not for the better, unfortunately, although home prices are on the rise nationwide) and I found that along with its estimate (or "Zestimate") of overall value, Zillow provides a "Rent Zestimate" of how much it thinks a home could fetch in rent. And our Rent Zestimate turns out to be about $300 higher than our current monthly mortgage payment. So for us, home ownership doesn't just cost less in the long term, it actually costs less per month right now.


    I also found a handy calculator from the New York Times that you can use to figure out whether renting or buying is better for you based on a whole bunch of different variables (current rent, home price, interest rate, and so on). Enter in all the figures, and it will show you how many years it takes before investing in a home makes you better off financially. (It appears to assume that home prices and rents are both rising at roughly the same rate as overall inflation, which may or may not be accurate--but at least it's more accurate than assuming home prices will drastically outpace inflation, as such calculators often did in the past.)

    My Ecofrugal Living blog: ecofrugality.blogspot.com
  • Wed, Aug 8 2012 11:42 PM In reply to

    Re: Should You Buy or Rent?

    Thanks for sharing teh zillow.com website. I hadn't heard of it before.

    That sounds good, but bear in mind the extra expenses of renting the home. Tenants tend to not be as careful with a home as an owner, and when they move there is usually at least some damage, moreso if they had pets.  Plus the cost of wherever you would be living while renting your home.

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