1. Renting Vs. Buying a Home

2. Scenario
A renter starts out paying $800 per month with annual increases of 5%. A homeowner purchases a home for $110,000 and pays a monthly mortgage of $1,000
With the tax savings of homeownership, the homeowner's payment is less than the rental payment after 3 years.
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3. You should buy a house if…
You have a secure job and income
You plan to live in the house more than a few years
You have enough money for a down payment
You can afford the monthly payment (not to exceed 35% of your gross income)
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4. 4 Advantages of Buying a Home
Building Equity – as you pay down what you owe and the value of the property increases, you earn equity. Equity is the value of the house minus what you owe.
Savings on Taxes – On your taxes, you can deduct mortgage interest and property taxes.
Improvements – As a homeowner, you can paint, landscape, and improve your home to your liking.
The American Dream – pride of ownership

5. 4 Disadvantages of Buying a Home
Maintenance – You pay for all repairs
Rising cost of: Insurance, HOA fees and property tax (property taxes vary by location)
Selling – Having to sell if you move and paying for realtor fees and closing costs
Liability – If something happens on your property, you could be sued for damages

6. 4 Advantages of Renting
Maintenance – The owner of the home/apartment pays for maintenance.
Predictable Costs – You will know the exact cost of rent for the period of your lease.
Flexibility – At the end of your lease, you can move easily without having to sell your home.
Temporary – Over time, you can live in many different places without being tied down to a home.

7. 4 Disadvantages of Renting
No Tax Benefits – You cannot write off taxes and the interest on a mortgage
No Equity: You did not benefit from the value of the house/apartment going up
Rent Increases – Your rent could increase at the end of your lease.
Not Permanent – At the end of your lease, the property owner may not renew it.

8. Equity Example
You buy a house for $250,000. You put $25,000 down and take out a loan for the remaining $225,000. You make payments for 10 years which reduces the amount you owe the bank. You now owe the bank $160,000 instead of $225,000. The value of your house has risen to $375,000 in those same 10 years.
$375,000 (the value of your house)
-$160,000 (what you still owe the bank)
$215, (your equity)

9. What is equity good for?
Now you are married and expecting a child. The house you bought 10 years ago is not large enough for your growing family. You can now sell your house for $375,000. The realtor’s fees and closing costs add up to $30,000.
$375,000 (the value of your house)
$30,000 (realtor’s fees and closing costs)
-$160,000 (what you still owe the bank)
$185, (profit)
You can take the profit from the sale of this house and use it as a down payment to purchase a larger house without raising your monthly mortgage payment!

10. On Your Own