THIS IS A TOPIC THAT CAN BE EXTREMELY COMPLICATED
Because there are so many factors to consider in calculating it. In all reality, your goals and plans for the future affect the answer to this question as much (if not more than) the way the numbers crunch. Before you begin reading this ebook, you should ask yourself and your spouse what your plans for the future are in regards to both your living arrangements and your finances.
Usually the cost of rent and the cost of buying a home will go up and down together, but there may be differences specific to your area that tilt the scale towards either renting or buying.
LET’S GET INTO THE MEAT OF THINGS:
The numbers that you need to be comparing and the ones that don’t mean as much as you might think. In looking at these numbers, we’re going to assume that if the borrower is going to purchase a home, he or she is going to do so with a VA loan (we’re a VA Mortgage Lender). This matters because the terms on a VA loan go a long way in mitigating the more burdensome parts of purchasing a home. The numbers that you need to consider when deciding whether it’s better to rent or buy include the monthly payment, associated expenses, and future return.
THE MONTHLY PAYMENT
This is one of those things that you can’t just compare straight across the board. The thing about buying a house is that when you pay off principal on the home, you’re not actually paying money, you’re just turning a liquid asset into a less-liquid asset – trading cash for ownership in the home. Not only do homes retain their value over time (even with crashes like 2008), but they also rise in value, on average, at a rate of 3.5% per year. This makes your home a veritable investment. So, comparing the full monthly PITI payment on a home to the rent payment on a comparable home is not what you need to be doing to find out which is better – you should take out the principal of the mortgage payment and only compare the interest, taxes, and insurance you pay on the home to the cost of renting a similar home. If you can rent a comparable home for less than the interest, taxes, and insurance you would be paying on a home purchase, this can be a score for renting.
However, this is far from the whole story.
Click here to check out our eBook and learn why Renting or Buying would be best for you.