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Home Ownership vs. Renting

You've heard time and time again that you can buy a home for the same amount you're currently paying in rent.  But is that really true?  What do those numbers actually look like? Why should you own a home when renting means little responsibility and a short term commitment? 

It's our goal to provide you with answers to all of those questions in a concise, easy-to-understand dialogue.  So let's get started!

Mortgage Payment vs. Rent Payment

Can you really buy a home and have about the same monthly payment as when you rent?  Sure!  Here's the average rent at a few local apartment complexes:

Governor Mifflin Apartments 2 Bedroom $850
Lincoln Park Apartments 2 Bedroom $950
Madison at Wynnwood 2 Bedroom $1200
Madison at Wynnwood
3 Bedroom $1700
Madison at Exeter
3 Bedroom $1350

 

 

 

 

 

 

We know that there are both less expensive and more expensive rental options, but for our purposes, we're going to say that the average renter is paying $1000/month for a 2 bedroom apartment.  How much house can you buy for $1000/month? Let's use a mortgage calculator and find out. 

 

 

Powered by Mortgage Calculators

What Costs Make Up a Mortgage Payment?

  • Principal - the total amount of money borrowed broken up into payments for the life of the loan. The ratio of principle, balance and current home value = equity.

  • Interest - a percentage of the total amount borrowed that is paid to the lender 

  • Property Tax - a  tax on property imposed by municipalities; based on the estimated value of the property. View Berks County tax rates.

  • Homeowner's Insurance - An insurance policy that combines various personal insurance protections, which can include losses occurring to one's home, its contents, loss of its use, or loss of other personal possessions of the homeowner, as well as liability insurance for accidents that may happen at the home or at the hands of the homeowner.

  • PMI - or Private Mortgage Insurance, this cost is designed to protect the bank from homebuyers who put down less than a 20% downpayment (or, most first time homebuyers!) The good news is that once 20% of your loan is paid off, PMI goes away, reducing your monthly payment.

Why is Owning a Home Good for My Future?

In one word, equity!  Equity is the cash value of your home, minus the current loan balance. The more you pay on your home, the more equity you have.  Building equity in a home is a much better use of your hard-earned money than paying it to a landlord. You can add value to your home by making improvements and even gain value based on the marketplace.  That means that when you sell, your home could be worth more than you paid for it, resulting in extra dollars in your pocket whereas renting wouldn’t have given you a chance to earn any equity and therefore you'll recieve no extra money when moving on.

There’s also the possibility you will pay off your mortgage and decide to stay living in your home. At that point, you would begin to save significantly (vs. renting) because there will be no more monthly payments.

Until you pay off your mortgage, you can take advantage of tax breaks that will save you money. For example, if you own your home and itemize your deductions, then you can deduct the amount of mortgage interest and real estate taxes you pay each tax year. 

What Else Should I Know?

Interested in learning more? Click here for a step by step guide to buying a home.

How Do I Get Started?

  • Fill out the form below, press submit, and you're done! We'll be in contact with you shortly.
  • Ready to create a customized home search? Click here.
  • Want to talk to a mortgage professional to see if you're eligible for a loan?  Click here to email Andy Dautrich at Mortgage America, or visit their website.

 

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