what are the benefits of renting vs buying a house? (since i'm not having any luck finding what i want and mortgage rates are rising)

Renting:
no closing costs
less responsibility


Buying:
equity building
can do whatever you want to the place
tax benefits?

7/20/2008 3:19:03 PM

Oh, yes there are tax benefits. Are there ever

If you can afford to buy, and don't have some incredibly compelling reason to rent, buy.

[Edited on July 20, 2008 at 3:26 PM. Reason : ljkd]

7/20/2008 3:25:40 PM

pro to renting: you can move quickly and easily. you are really married to an area if you end up buying it.

pro for buying: as for the tax help on buying, you get almost 1/3 back as a tax credit on the interest and taxes that you pay on a house.

7/20/2008 3:40:13 PM

i see no benefit to NOT buying if you'll be in the area for a good while

if you think it'll be more temporary, then often times renting is the better choice

aside from that, a wise man once told me "buy the least expensive house in the most expensive neighborhood"

7/20/2008 3:41:45 PM

depends really

if you buy

be DAMNED SURE you'll be happy where you are for awhile

7/20/2008 3:46:28 PM

Property taxes
Insurance
Depreciation

They are all low up there but in FLA they are the reason renting is better.

7/20/2008 3:52:19 PM

It depends on your situation. If you have enough money for a down payment and you have your debts paid off and a reserve fund of at least 3 months of living expenses, then definitely go for it. If not then rent a cheap place, pay off all your debt, and save up until you've got the money for it.

7/20/2008 5:54:08 PM

plenty in the bank
credit score in the mid-700s
no debt
stable job
just started grad school

guess that's a BUY then?

7/20/2008 6:21:49 PM

Will you have the same job after grad school, or definitely be in the same area? Do you have 20+% to put down? What's the price to rent compared to the mortgage price+insurance+taxes+hoa? Are you living by yourself, will roommates help you out?

7/20/2008 6:39:27 PM

take what you would pay for rent at a place you are considering buying....ie $1400. Multiply that by 12 for the year....16,800. Then multiply by 15....252,000. Just using those numbers as examples, but if the cost of the house is much more than that then there's a good chance that the value will adjust down to around that level in today's market, and it might make more sense to rent for now.

Just one basic thing to look at, and obviously there are a lot of other factors

7/20/2008 9:10:53 PM

^^you only need to put down 3% with his situation...if that

Quote :

"no closing costs less responsibility"

closing costs can be wrapped in so basically all you would have to pay upfront is your down payment. If you have the credit to buy and live in a place like nc then good heavens BUY. The only time its not worth it to buy is when you are in a place of high demand like sofla cali or nyc where insurance taxes and all make buying astronautical but in the ncsu area buying is the same and at time cheaper so it makes absolutely no sense to rent. If you plan on leaving in a few years then you can rent your house and have a source of extra income. Renters are just paying the landlords mortgage AND SOME up there. In sofla its a different ball game because people who bought 30 years ago paid 1/10th of todays value so it they don't have to forward the current market value mortgage payment onto the renter.

7/20/2008 10:16:18 PM

Quote :

"astronautical"

you just lost all credibility with that

7/20/2008 10:31:37 PM

Quote :

"pro to renting: you can move quickly and easily."

Not really. If you rent you're probably in a contract that dictates when you can leave. I can pack my shit and put my house up for sale whenever I want. If the price is right it'll be gone in a month. If not it might take a while depending on how long you're willing to wait for the right buyer.

7/20/2008 10:43:35 PM

I remember Clark Howard saying that as a general rule unless you plan on being in the area for at least five years you're probably better off renting. I can't remember what his reasons were though.

7/20/2008 11:20:08 PM

Quote :

"pro for buying: as for the tax help on buying, you get almost 1/3 back as a tax credit on the interest and taxes that you pay on a house."

This is not necessarily true. Everyone gets a standard deduction of around 5500 or 10000 for couples if they rent or buy. So you really only save the interest minus this deduction, not the whole amount.

7/20/2008 11:26:04 PM

Quote :

"plenty in the bank credit score in the mid-700s no debt stable job just started grad school guess that's a BUY then?"

I think so. It's a buyer's market right now, fixed mortgage rates are in the 6.5% range, and a lot of places are offering pretty good incentives. I bought a townhouse a few months ago and got a couple roomates paying 90% of my mortgage while I build a little equity and get some tax benefits out of it. It's a pretty good deal.

7/20/2008 11:30:04 PM

the rest of the country may be a buyer's market, but it's not necessarily one in the triangle area.

7/21/2008 12:55:06 PM

Quote :

"This is not necessarily true. Everyone gets a standard deduction of around 5500 or 10000 for couples if they rent or buy. So you really only save the interest minus this deduction, not the whole amount. "

so if i paid $9500 in mortgage interest last year, i would get around $4000 back from my mortgage interest alone?

or would I just not pay taxes on $4100 of income...and get back the amount that I did pay on that money?

7/21/2008 1:09:50 PM

yeah i heard the whole "buyer's market" also. The wife and I were looking at houses and even were talking with a realtor.. we found a couple places but they were way out of our price range.
The ones that were in our price range were very small and old and we'd rather rent and save up until we can afford a nicer place.

7/21/2008 1:15:06 PM

The Buyer's Market that the Triangle is experiencing right now is mainly focused on the $200k and up properties.

Under $200k is still moving, but it is slow.

I would always recommend buying vs. renting.

Also, a couple of tidbits on mortgage borrowing. The bank is only going to allow about a 40% debt to income ratio. That being said, if you make $1000/month, then you can have $400 of debt payments per month. This includes personal loans, car loans, student loans, etc. This doesn't include monthly bills like the power bill.

Fixed Rate vs. 2 year ARM
YMMV, but if you are planning on staying in a home more than 12 years, then a fixed rate mortgage is the way to go. But if you are planning on moving, you will save money (as long as you start out at a 1.5% lower rate in the arm, and you can only adjust 1% every 2 years).

7/21/2008 1:37:26 PM

Quote :

"so if i paid $9500 in mortgage interest last year, i would get around $4000 back from my mortgage interest alone? or would I just not pay taxes on $4100 of income...and get back the amount that I did pay on that money?"

rudeboy was wrong when he said the interest was a tax credit. It is not a tax credit, it is a tax deduction. A tax credit is something that subtracts from your total tax bill, a deduction is something that subtracts from your total taxable income. There are other tax deductions as I'm sure you are aware of such as charitable donations etc... What I was saying is that every independent tax filer gets the option of a standard tax deduction instead of itemizing their deductions. This standard deduction was $5350 for a single filer, or 10700 for a joint filer for the 2007 tax year. So in short, any mortgage interest you pay can be subtracted from your taxable income, therefore allowing you to pay taxes on a lesser amount. However the amount you save from buying is NOT this whole deduction since EVERYONE gets to file with the standard deduction.

That being said, I do think now is a good time to buy. However, no one knows when this market is going to recover, especially with the Freddie Mac and Fannie Mae rumors. I also don't think people fully analyze the costs of owning a house. The transaction costs of buying and selling a house add up to about 10 percent of the price of a house in most cases. This is A LOT and means the house would have to appreciate 10 percent to break even. Houses tend to appreciate at an average of 3.5-4% a year over a long period of time. So if you do the math, this means in an average market about 3 years to break even. This does not take into account the maintenance. Homes that people tend to start out in can be older 15-20 year old homes. There is nothing wrong with these homes, however they tend to require a lot of expensive maintenance. This is about the time a new A/C unit is needed, the roof needs repairing, new water heater, ...etc . I think owning a home is a great thing and can be a wise investment. However, one needs to know all the costs associated with it before diving in.

7/21/2008 1:52:56 PM

Quote :

"so if i paid $9500 in mortgage interest last year, i would get around $4000 back from my mortgage interest alone? or would I just not pay taxes on $4100 of income...and get back the amount that I did pay on that money?"

Like ^ said, its a deduction, not a tax credit. By paying $9500 in mortgage interest you would not pay taxes on an additional $4100 of income vs taking the standard deduction thereby saving you about 1/3 of the additional amount ~$1400

7/21/2008 2:42:45 PM

Quote :

"I would always recommend buying vs. renting."

That's not very good advice.

Quote :

"YMMV, but if you are planning on staying in a home more than 12 years, then a fixed rate mortgage is the way to go. But if you are planning on moving, you will save money (as long as you start out at a 1.5% lower rate in the arm, and you can only adjust 1% every 2 years)."

Easier said than done. When I bought my place the 30 year fixed and arm rates were almost identical to the arm. I have no clue where you get that 12 year number from. You could easily lose money by going with an arm if you plan to be there less than that.

7/21/2008 2:51:28 PM

definitely check out this thread for more info message_topic.aspx?topic=409273

that said, i picked up a 1620-sqft house on nearly 1 acre all of 5 minutes from campus for less than my two roommates and i were paying for rent at our other place

no down payment, no PMI, no origination fee, first-time homebuyer's loan from SECU...i spent about $1000 out of pocket on the inspections and closing and such, but that was it

my neighbors are grad students who like to garden and do house projects like i do, and the neighborhood is nice...i have yet to get a roommate (because, really, i like having my own place and i can easily afford to keep it to myself), but the guys next door MAKE money on their house because of rent

*shrug*...now's a good time, IMO

[Edited on July 21, 2008 at 3:29 PM. Reason : .]

7/21/2008 3:29:09 PM

say you were looking at a house in the 160s to 170s

what type of salary would be needed to comfortably afford that?

7/21/2008 10:41:12 PM

i think banks want your house payment to be no more than 1/3 your monthly salary, and that might be assuming you're putting down 20%. if you can do that, you'd be crazy not to so you avoid mortgage insurance. just pretend you DO have mortgage insurance and send that along as an extra payment on the principal. the first years of your loan are the most crucial to reducing debt.

don't forget about unforeseen mishaps like broken dishwashers, trees falling on your roof, and other typical homeowner woes. not to mention property tax. my advice is that if you are barely going to get by, you should wait until you're in a better situation. it would be a damn shame to lose your house because you got in over your head even by a little bit.

7/21/2008 11:03:26 PM

^^havent read the thread.. how much other debt do you have?

7/21/2008 11:20:59 PM

^^^ yeah it depends heavily on other debt you have and what you have in the bank as well as down payment

7/21/2008 11:55:40 PM

bbbasically.

give us some relative numbers, percentages, something and i'll try to give you an idea

or PM it if you dont want it out there

or you can probably just google it

7/21/2008 11:56:32 PM

dude just call a lender and ask how much you can get approved for

figure monthly payments and see if you can swing it per month

i qualified for a lot more than i was willing to take out so i took out a much smaller amount than i was "approved" for

just because you're approved for it doesn't mean you can afford it, thats your call

7/22/2008 12:00:13 AM

Quote :

"send that along as an extra payment on the principal."

Prepaying mortgage FTL!

7/22/2008 8:09:57 AM

renting:

about 1/3 as much money



mortgage:

with no down payment about 5/6 of it may as well be rent

7/22/2008 8:21:59 AM

yep, if you're single, it would behoove you to get roommates to pay that mortgage for you.

7/22/2008 8:26:41 AM

pre-approved for 200k, not gonna get near that number though

probably gonna go the 3% down FHA loan since i can't con the folks into throwing some money at me to bump the down-payment up (will probably throw a few more K at it just to reduce my monthly payments a bit though)

no debt, though i may need a new car soon since i drive it 500 miles a week and hasn't been feeling right for a while (i'm not a car guy i have no fucking idea what's up with it, it may just need a tune-up)

[Edited on July 22, 2008 at 8:31 AM. Reason : ^i really can't stand roommates, but it is something i've considered]

7/22/2008 8:30:58 AM

You should have the mental capacity to model this out in excel.

Start with a 30 year amortization chart file. Add in an HOA payment. Add in property tax. Add in lawn care because I doubt you're going to do it yourself. Add in home insurance.

Then put in a multiplier for what you think the house is going to gain in value per year.


Assuming you have made it this far you will be able to see how much you can lower your taxable income by (interest column and property tax). You will also see how little you actually own and can subtract what you owe the bank from the appreciation calculation you've done.



You're ahead of 90% of the world in that you were at least gifted with enough brain power and problem solving to figure this out yourself. Blanket statements like "oh but you will save money in taxs" , " oh but the house will gain value", "renting is throwing money away" are for the other 10%.




[Edited on July 22, 2008 at 8:35 AM. Reason : lean with it , rock with it]

7/22/2008 8:34:54 AM

i suck ass at finances though

NO ONE EVER TAUGHT ME THESE THINGS

7/22/2008 8:55:16 AM

Quote :

"probably gonna go the 3% down FHA loan since i can't con the folks into throwing some money at me to bump the down-payment up (will probably throw a few more K at it just to reduce my monthly payments a bit though)"

any reason you wouldn't go with a loan from the state employees' credit union? let me repeat - no down payment and no PMI (granted, this is an ARM, but at 4.75%, adjustable every 2 years, you'd have to have the loan more than 4 years - assuming a maximum increase each period - to match what you'd be paying up front with a fixed-rate, AND you don't have a down payment or PMI AND you'd save that much money every year in the first place)

[Edited on July 22, 2008 at 9:24 AM. Reason : if you do 10% down, there's PMI, but 4.25%]

7/22/2008 9:12:34 AM

http://www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAPHIC.html

from a purely financial standpoint

7/22/2008 9:16:10 AM

Generally, if you know you won't be moving within 3 years, you should buy if your circumstances allow it. But otherwise renting is probably better.

The lower end market (under 225k) is really good for buyers right now.

7/22/2008 9:41:12 AM

Quote :

"You're ahead of 90% of the world in that you were at least gifted with enough brain power and problem solving to figure this out yourself. Blanket statements like "oh but you will save money in taxs" , " oh but the house will gain value", "renting is throwing money away" are for the other 10%."

im glad someone said that

7/22/2008 9:44:55 AM

Quote :

"granted, this is an ARM"

i'm wary of ARMs

Quote :

"you won't be moving within 3 years"

have a full-time job and just got into grad school - it's gonna take at least 3 years to get the degree

[Edited on July 22, 2008 at 10:20 AM. Reason : it's early, i'm weary]

7/22/2008 10:07:10 AM

^ weary or wary? because i cannot, for the life of me, figure out what the big deal is...there is no super-secret invisible ink that says that you have to give up your first-born or anything if you go with an ARM...here's how it breaks down:

4.75% with no PMI and no down payment
2-year intervals with a 1% cap (worst-case scenario), so:
year 1 and 2: 4.75%
year 3 and 4: 5.75%
year 5 and 6: 6.75%

what's the best rate you can find with a fixed-rate loan? 6.25% was the best i could do, and that required PMI and a 10% down payment...so for FOUR years you're getting a GREAT rate, not to mention the fact that you save TENS OF THOUSANDS of dollars by not having a down payment or PMI...shoot, after SIX years you're still doing well

around year 4, i'd definitely check out the possibility of re-financing, but if you don't, so what? you pay a decent rate of 6.75% for the next 2 years...it's not like you HAVE to stay with the ARM, so why not take advantage of it while the rates are good? even if you re-finance and the fees are as much as you'd have spent in PMI and the money you saved with the lower interest rate (and, really, they'd never be that high), how is this anything but a winning situation?

i ♥ SECU

[Edited on July 22, 2008 at 10:18 AM. Reason : .]

7/22/2008 10:17:23 AM

you make a good point

7/22/2008 10:21:26 AM

^That's the route I took with my loan. The rate has actually gone down since I got it. SECU does a great job at handling their 2 year ARMs.

7/22/2008 10:22:51 AM

^I can't believe their rates are that good right now. I checked before we bought our house and the rates sucked compared to ING Direct.

7/22/2008 10:23:41 AM

They are actually doing really well. My mom works there and said that the company is not seeing any of the foreclosure issues that the other banks are currently seeing.

7/22/2008 10:26:11 AM

yeah, i was told that it was entirely possible that their rates WOULD go down or, at least, that their rates would not go up the full 1% maximum point...and while i would hope they'd go down, i'm planning on them maxing out every 2 years, for the sake of good planning

that said, NC SECU really is well-managed...if anyone needs an account set up (if you're not a state employee), let me know...i'd be happy to refer you (each account gets a few referrals for non-state employees, i think)

7/22/2008 10:31:14 AM

Quote :

"no debt, though i may need a new car soon since i drive it 500 miles a week and hasn't been feeling right for a while (i'm not a car guy i have no fucking idea what's up with it, it may just need a tune-up)"

if you are looking to buy soon, i would hold off on the car (assuming you get a loan)

mortgage lenders will not like that you bought a new car right before your new house and have the right to pull your loan, or any new credit for that matter

if the home buying thing is happening soon, i'd wait until you're living in the house until you buy a new car

7/22/2008 11:28:42 AM

has anyone mentioned that their mortgage is pretty much cheaper (minus insurance and hoa) than their rent was when they paid rent

it was like the first time going into the liquor store after turning 21 and realizing a fifth didnt really cost 40 bucks

[Edited on July 22, 2008 at 11:33 AM. Reason : also dont listen to these people just call the SUPERJEW - clark howard. 101.1fm 1-4pm]

7/22/2008 11:32:27 AM

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7/22/2008 11:33:21 AM