Buying vs. Renting a Home
House
Offers the widest variety of living option and remains the preferred housing choice for most people. Available in many sizes and costs - new or old. Homeowner associations becoming more popular to support amenities. Flexible to own but a significant investment.
Renting
Often the least expensive housing option -offers a set monthly expense, has minimal maintenance responsiblity, provides the ability to relocate easily when lease expires.
Escrow
Payment for insurance & Taxes
Rent
Regular payment made by a tenant to an owner for the use of the owner's building or land.
Down payment
Required to protect lender in case of default - usually 20% of house price/loan.
House Payment to Income Ratio
Should not be more than 28% of income
Tenant
Someone who pays rent to use land or a building or a car that is owned by someone else.
Disadvantages of buying a house
Substantial financial commitment, requires a down payment and additional fees such as points and title insurance, living expenses tend to be higher, requires time commitment and work, face the risk of losing money on your investment.
Landlord
The owner of rental property
Advantages of buying a house
*Improved privacy and security over living in an apartment, *Right to remodel or decorate as you please, *Provides a sense of permanency, *Builds equity, *Tax benefits.
Closing costs
Expenses of a property sale that must be paid in addition to the purchase price.
Advantages of Renting
Flexibility, no down payment, no repair or property maintenance costs, wide variety of amenities, more freedom to relocate.
Condominiums
Generally offer similiar amenities to apartment complexes. Difference: condo and coop dwellers generally own their units, owner shares the cost of maintaining common areas through monthly homeowner association fees.
Housing options
House, apartment, condo, townhouse
Disadvantages of Renting
Lack of control over property, lack of privacy, potential delays in property repairs, may be restricted in terms of personal redecoration choices, limitation on pets/children, do not build equity, no tax benefits.