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Less to Own than to Rent
The question is “financially speaking, are you better off owning than renting in the long term?” Renting a home has advantages. It is usually a short-term commitment from year to year and the landlord is responsible for the repairs. Owning a home with today’s low mortgage rates, the total house payment could easily be less […]
Less to Own than to Rent
The question is “financially speaking, are you better off owning than renting in the long term?” Renting a home has advantages. It is usually a short-term commitment from year to year and the landlord is responsible for the repairs. Owning a home with today’s low mortgage rates, the total house payment could easily be less […]

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The question is “financially speaking, are you better off owning than renting in the long term?”

Renting a home has advantages. It is usually a short-term commitment from year to year and the landlord is responsible for the repairs.

Owning a home with today’s low mortgage rates, the total house payment could easily be less than what the rent would be on a comparable home. Once you assume ownership, you will have the responsibility of the repairs and possibly, a homeowner’s association fee.

Many times, an initial benefit of owing a home includes the ability to deduct property taxes and qualified interest on the mortgage. With the increase of the standard deduction and a limit of $10,000 on state and local taxes, it is estimated that 90% of homeowners do not itemize their deductions to consider property tax and mortgage interest. This comparison will not consider them.

There are two very significant benefits that contribute to a home being an excellent investment and they are principal reduction due to normal amortization of the mortgage and appreciation of the property. While the property goes up in value and the unpaid balance decreases, the owner’s equity grows, increasing their net worth.

Renters do not benefit from either of these, but their landlords do. That is the reason for the saying “whether you rent or buy, you pay for the house you occupy.” Tenants pay for the home for their landlord.

Rent Own
$2,500 Rent/Payment $2,232
-0- Principal Reduction $504
-0- Appreciation $875
-0- Estimated Monthly Maintenance $300
-0- Estimated Homeowners Association Fee $25
$2,500 Net Monthly Cost of Housing $1,178

*Projections based on 3% appreciation; $350,000 sales price with 10% down payment and a 3.5%, 30-year mortgage.

With each payment made on a fully amortized loan, the principal balance is reduced. While appreciation is generally expressed in an annual rate, homes go up in value incrementally throughout the year so considering the monthly appreciation is appropriate in this comparison.

In this example, the payment is less than the rent proving the initial idea that it costs less to own a home. After factoring in the effect of the principal reduction and the appreciation, even when you consider the maintenance and HOA fees, the net monthly cost of housing is considerably less than renting.

The largest part of the savings inures to the equity of the home which directly impacts a homeowner’s net worth. While the money may not be easily accessed, it has real value and available in a cash-out refinance or when the home is sold.

If you curious about how your numbers would be reflected in a similar comparison, go to the Rent vs. Own. Please let me know if you have any questions.

LIST OF BLOGS

3615 Janet Rd, Silver Spring, MD 20906

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5851 Riverside Dr, Woodbridge, VA 22193

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15762 Edgewood Dr, Dumfries, VA 22025

Price: $449,900 15762 Edgewood Dr, Dumfries, VA 22025 MLS #: VAPW2004188 Tax ID #: 8190-67-1092 Ownership Interest: Fee Simple Association: HOA Structure Type: Detached Levels/Stories: 3 Furnished: No Waterfront: No Garage: No Beds: 0 Baths: / 1 Above Grade Fin SQFT:...

5432 New London Park Dr, Fairfax, VA 22032

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6000 Wilmington Dr, Burke, VA 22015

Price: $735,000 6000 Wilmington Dr, Burke, VA 22015 MLS #: VAFX2009428 Tax ID #: 0783 11 0119A Ownership Interest: Fee Simple Association: HOA Structure Type: Detached Levels/Stories: 2 Furnished: No Waterfront: No Views: Garden/Lawn, Street, Trees/Woods Garage: No...

12489 Selkirk Cir, Bristow, VA 20136

Price: $390,000 12489 Selkirk Cir, Bristow, VA 20136 MLS #: VAPW2004086 Tax ID #: 7495-92-6669 Ownership Interest: Fee Simple Association: HOA Structure Type: Interior Row/Townhouse Levels/Stories: 3 Waterfront: No Garage: No Beds: 2 Baths: 2 / 1 Above Grade Fin SQFT:...

1203 Weatherstone Ct, Reston, VA 20194

Price: $625,000 1203 Weatherstone Ct, Reston, VA 20194 MLS #: VAFX2010768 Tax ID #: 0112 10070034 Ownership Interest: Fee Simple Association: HOA Structure Type: Interior Row/Townhouse Levels/Stories: 3 Furnished: No Waterfront: No Views: Garden/Lawn, Lake, Other,...

5312 Arapaho Ln, Alexandria, VA 22312

Price: $600,000 5312 Arapaho Ln, Alexandria, VA 22312 MLS #: VAFX2010758 Tax ID #: 0723 34 0134 Ownership Interest: Fee Simple Association: HOA Structure Type: Interior Row/Townhouse Levels/Stories: 4 Waterfront: No Garage: Yes Beds: 3 Baths: 3 / 1 Above Grade Fin...

22893 Adelphi Ter, Sterling, VA 20166

Price: $540,000 22893 Adelphi Ter, Sterling, VA 20166 MLS #: VALO2004334 Tax ID #: 024450607000 Ownership Interest: Fee Simple Association: HOA Structure Type: End of Row/Townhouse Levels/Stories: 3 Waterfront: No Garage: Yes Beds: 3 Baths: 2 / 1 Above Grade Fin SQFT:...

11503 Rabbit Run Ter, Silver Spring, MD 20904

Price: $509,900 11503 Rabbit Run Ter, Silver Spring, MD 20904 MLS #: MDMC2007770 Tax ID #: 160503337020 Ownership Interest: Fee Simple Association: HOA Structure Type: Interior Row/Townhouse Levels/Stories: 3 Waterfront: No Garage: Yes Beds: 3 Baths: 2 / 2 Above Grade...

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