1. Family Economics and Financial Education Take Charge of your Finances
Renting vs. Owning
Family Economics and Financial Education
Take Charge of your Finances

2. Introduction Housing is the largest personal expenditure.
About 1/3 of a person’s income.
Choosing where to live is based upon a person’s goals, values, needs, and wants.
Places to live include:
House, apartment, condo, mobile home, etc.

3. Reasons for making a housing choice
Personal and financial goals
Personal values, needs, and wants
Amount of money available for housing costs
Financial resources and readiness
Credit history
Real estate prices
Location preference
Expected length of stay in particular place

4. Costs of renting Monthly rent Security deposit
Utilities – electricity, water, garbage, etc.
Renter’s insurance

5. Renting
A lease is a legal contract between the tenant and the landlord, specifying the responsibilities and rights of both parties.
Identifies the rent amount, security deposit amount and specifications, payment for utility bills, late payment penalties, length of lease, eviction terms, etc.
This is between the landlord and the tenant
Landlord
Owner of the rental property.
May perform management duties or hire a property manager.
Property manager - may charge a fee to the landlord to perform the management task
Duties may include:
May collect rent and deposits, pay utility bills, complete repairs and maintenance, watch over the property, respond to tenant complaints, assign new tenants, etc.

6. Renting continued Tenant (renter) Renters are generally
The person who rents the property.
Renters are generally
People who choose not to own a home.
People who cannot afford to own a home.
The tenant pays rent to the landlord which allows them to live in the rental property.
Rent
The cost of using someone else’s property.

7. Moving into a rental
Upon moving into a new place, people are usually required to pay a security deposit and sign a lease.
Security deposit
An advance payment to cover anything beyond normal wear and tear on the unit.

8. Advantages of renting Low move-in costs Fixed monthly expenses
Easy to move
Location choices (may be close to work or school)
Less maintenance and repair work
Fewer responsibilities
May offer extra amenities such as a tennis court or pool
Typically less expensive than home ownership
May be able to save for other wants or needs if renting a less expensive apartment
Other expenses may be included in rent payment such as electricity, water, sewer, and/or garbage

9. Disadvantages of renting
Subject to terms of a lease
Rent may change with little notice
Less privacy and transient neighbors.
Restrictions on noise level, pets, etc.
Fewer opportunities to upgrade apartment such as new carpet, paint, or wallpaper.
When leaving a property, no equity is returned as it would be if selling a home.
No tax deductions
May lose rental if the property is sold.

10. Costs of ownership Monthly mortgage payments
Down payment (one time cost)
Closing costs (one time cost)
Utilities – electricity, water, garbage, etc.
Homeowner’s insurance
Real estate property taxes
Maintenance

11. Home ownership
Home ownership - the buyer has purchased a housing unit as property
Goal of many Americans
A large financial decision
Owning a home is an investment because if a person sells a home for more than what it was bought for, the person makes money. This is called equity.
Financial planning and savings can assist a person in planning for the benefits of home ownership later in life.

12. Purchasing a home 90% of buyers take out a mortgage
A home loan in which the real estate is the collateral
Collateral is an item promised to the lender if the borrower does not pay back the loan, usually the home.
Down payment
Amount of money paid on the home at time of purchase
Typically 10 – 20% of the purchase price of the home
Recommended purchase price amount an individual should pay for a home
2 ½ times their annual household income

13. Advantages of ownership
Build equity which can be borrowed against if necessary
Pride of ownership
Feel more comfortable and have more privacy
Stable mortgage payments
More room and storage
Improvement of buyer’s credit rating
Income tax deductions for property taxes and mortgage interest
Potential for property to increase in value
Free to make home improvements and have pets (items typically not allowed in rentals)

14. Disadvantages of ownership
Large down payment
Move-in costs
Insurance costs
Possible for property to decrease in value
Time, money, and energy commitment
Repair and maintenance costs
Property taxes can raise substantially
Money is tied up in the home
May take several months to sell a home if trying to relocate

15. People are always paying
Keep In mind. . .
People are always paying
for a home. It’s just a
matter of whether it is
for themselves or
their landlord.