“I Hate Paying Rent!”
One of my Minnesota First Time Home Buyers actually said this phrase to me last year while we were looking for homes. And I couldn’t agree more.
One of the questions you probably have if you’re currently renting is “why should I go through the hassle of finding a home, getting a mortgage, and owning my house when I could just rent for the rest of my life?”
Answer: You will save money in the long run by owning, NOT renting.
I won’t get into crunching too many numbers for you, but think of home ownership vs. renting like this: You own two cars, but only need one to get around. You decide to let your friend have possession of the second car for their use, but not for free. Since it costs you money to own the car, maintain it, repair it, and insure it, you would like your friend to pay some money to you each month as compensation for the use of your car.
That sounds fair. So you add up the costs of maintaing your car, and all the fees associated with its operation. But, in addition to those costs, you think it’s fair that since it is your car (aka your risk if something bad happens to it) that you should also add an overhead fee to your friend’s payment, just in case. You both agree, and in essence they lease the car from you for a period of time.
Not too complicated, right? Well renting a home is like being the friend in this story. You end up paying the costs associated with running the home and maintaining it, but you’re also paying additional money because of the risk the owner takes by renting it to someone else.
Do you see my point. Let me give you a real world example.
Another First Time Buyer client of mine bought a home this year, and their monthly payment (PITI) ended up being $1,050. It was a 3 bed, 1 bath single family home. I checked a couple rental homes in the area just to see how much money they’d be saving due to their purchase. I found 2 almost identical homes within 2 blocks of their house renting for $1,250 a month. And on top of that $1,250, the renters had to pay additional utilities every month.
I’m not a math major, but to me that’s a savings of
- $200/month
- $2,400/year
- $24,000 over 10 years
- $72,000 over the 30-year life of an average loan.
I don’t know about you, but I could use the extra $2,400 a year. And that’s not too mention the tax incentives the IRS gives you for owning your home.
Back to my client from last year, the one who “Hates paying rent!” We did find him a home, and his monthly payment was substantially less than the rent he’d been paying to his former landlord. Needless to say he went home happy, and is now enjoying the benefits of home ownership.
If you’re sick of paying rent and giving your money away to a landlord, contact me to start learning how you can buy a home in this market.
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