KWR: Rent v. Buy Home discussion

Check this out:

http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?_r=0

It's also not all about the mortgage. There's maintenance on a house, property taxes, home owner's insurance, etc. Are you sure you want to live in the area where you are for 5 or so years (or more?)

When you buy a home you have to keep in mind that when something goes wrong, you have to fix it. You cannot call the landlord to do it. You have to have a household fund set aside for those little "emergencies". For instance, two months after we moved into our house, the main floor toilet leaked into the basement and the washer stopped working. Two months after that, we had to buy a new oven. Luckily, we had an emergency fund.

FH and I are in a similar predicament. He owned a home before and it was empty/rented out for 5 years because he was unable to sell it (the area didn't have an active market). We are looking to live in another area with a slow real estate market and are actually going to rent for now. We don't want to be stuck with a house we know we can't sell when we know we're going to move in a few years.

Buying, I think, is definitely cheaper in the long run. You build up equity and generally mortgage payments are lower than rent. However, you have to think about all the expenses that come with home ownership. Lawn care, repairs, maintenance, etc. That's all on you when you own the home. Your FH may be right about grad school. It's just nice not to have the stress of home ownership while being in school!

We are in the process of buying a house right now so I have a bit of information, but of course not as much as a seasoned homeowner would.

- Yes a mortgage will be cheaper than rent, but depending on square footage utilities will be more (assuming your house you buy is bigger than what you're renting).

- You also have to consider homeowner's insurance, mortgage insurance if it's required with your lender, and all the fees and costs associated with actually purchasing the house ie. closing costs which include a slew of random fees from lenders, attorneys, etc.

- As a homeowner, you're responsible for all the repairs and maintenance that comes with owning a home - a landlord is not there to call if you have any issues with plumbing, ac, etc.

So yes, your mortgage would probably be cheaper than rent, but you might end up breaking even, or actually spending more on a house when you factor in all the other expenses that inevitably come with buying a house.

Your FH wants to go to grad school - what if he wants to go to grad school and the house you buy is not convenient to said school? With a house you're more tied down. Yes, you can technically sell it, but you might just break even and not have enough money required to buy another one.

It's a big commitment, and one you both need to be 100% on board with. Sorry for the long post!

I bought my house because it was cheaper than renting AT FIRST...

But there is everything that Future mentioned and more. Repairs can kill you; since I've been here, I've put in a new bathroom (it went from a 20.00 ikea light fixture to a new bathroom and asbestos removal), a sewage line repair (4000), rewiring, and many other things I didn't expect at all.

And you have property taxes. And tree maintenence. And lawn care....

It's time to make that excel spread sheet with the pros and cons.

I don't know where you're located but property taxes in NJ are INSANE. We pay more per month in property taxes then we do to our mortgage. And taxes (usually) only go up.

Some really good advice here. OP, remember, life has seasons. This season may be one of flexibility and mobility while your FH completes grad school. That season won't go on forever, and when you enter into a new season, that may be the right time--and place--to buy a house. If it's straining your relationship, let it go for now. Believe me, I understand the itch to own your home, especially as a married couple. Grad school is, what, two or three years? That'll go by very quickly.

You are all making really great points, thank you! Keep them coming!

I agree 100% with Ceclia. Make a pro-con list.

Your first step should be mortgage shopping. You will want to put down 20% to avoid PMI. I have PMI on my condo and I am paying down the principle to get out of my PMI early. It is 40 a month, which doesn't sound much but it's a pain in the ass. My monthly payment goes up every year because I have an escrow and my property insurance has gone up every year. The increase is minimal, but still there. My mortgage is only 615, but I pay monthly PMI, insurance, and property tax.

I also put about 1000 in repairs the first year, which is really low. You will want to have an emergency fund of at least 6 months incase someone looses a job, a pipe breaks, ect.

The bonus to renting if flexibility. Do you plan on staying where you are? Do you both have jobs you want and are able to keep?

@#vine, Yeah we plan on staying where we are currently located because all of our family and all my doctors and stuff for my diabetes is here and its about the same drive he has to make to work as the school he wants to go to for grad school. We both have stable jobs with no intention of quitting any time soon.

My taxes/ insurance on my home are literally equal to my mortgage in NY state. I pay $400 on my mortgage and $400 in an escrow account every month toward annual property taxes and home owners insurance. If it is straining your relationship, rent and buy later when he is ready.

Are you basing the $700 mortgage on the estimates shown on real estate pages? Those are way off generally. They don't factor in PMI if you get a FHA loan, escrow, or homeowners insurance. We bought a house for $156,000 and the mortgage estimate online was $700. Our actual mortgage is just under $1,000.

@wombat I'm just basing them off of what we were pre-approved for in the event we do decide to buy as well as what a few of my friends are currently paying

OK I need to know where you live that mortgages and rents are so cheap! I live in the south and thought I had it good.

I bought my first house this year after renting for almost 9 years. My rent was $1300, my mortgage is $1358 - not too bad, right? But then I also pay $207/month in HOA dues, which are increasing to $250/month in 2017. My house is bigger so my utilities have gone up, and I have to pay for gas and water now too (previously water was paid by my landlord and I didn't have gas).

I love owning but it is definitely expensive. I put 10% down which still left me with a good chunk of savings, but then I bought new furniture, décor, etc.

They both have their pros and cons. I don't regret buying at all, but it is more expensive than I had anticipated. I'd recommend figuring out your budget, then tacking on a few hundred extra each month for unforeseen expenses, atleast in your first 6 months to a year.

@Celia YES tree maintenance is awful! My fiancé is renting his house out and tree roots damaged his neighbor's driveway. They luckily covered the cost of that but rightfully asked him to cut down the tree. $6500 later...

@Laura a small town in Southern Illinois, about 45 minutes from St. Louis

As someone who is a year into home ownership, I wouldn't necessarily say a $700 mortgage is really going to be cheaper. When DH and I were renting, we spent about $900 total on rent, electric, and internet/cable for a one bedroom apartment. We would look on zillow, etc., and it would say we could buy huge houses for the same price. My DH and I are quite good with our finances, and we knew it wouldn't work out that way. We decided to build a house, which is much much larger (2300 sq feet,) but for our mortgage (with PMI & Homeowners insurance,) gas, electricity, cable/internet, water, garbage disposal, HOA payment, etc., we're a little less than double our rent. This is when they said "our mortgage" would only be about $1000/month. Owning a home is EXPENSIVE. While DH and I can easily afford it, it's not as cheap as everyone seems to think. Don't forget you need appliances, blinds, lawn mower/snow blower, and a million other things. We also put in a sprinkling system, garage door opener, and still need to put in landscaping/yard. We bought new furniture and did some decorating. It adds up fast.

When things break, you don't have a landlord to fix them. Plumbers are expensive. Electricians are expensive. Really really make sure you can afford a home before making the leap.

It's definitely a commitment depending on where you live. In my area in CA we could buy one today and sell next month and make money the way things are going. It's insane. Definitely would save us money to buy. Rents are out of control. Our rent now is $2,300 and I know if we bought we could probably get it down to maybe $1,800. We'd have to move to a completely different area though. We can't afford to buy a $600,000 house which is what they all cost in our area. Ugh! Anyway, If buying only saves you a couple hundred dollars not including maintenance and property taxes then maybe just wait a while. You should both be sure about where you want to settle down.

This is something you need to be on the same page about 100%. I am itching to buy a home, but DH and I have decided to wait 8-10 months before looking so we're in a healthy place financially (rainy day fund + 20% downpayment). You need a large savings account for rainy days and household emergencies. That's why we're waiting! If your FH isn't ready, as a couple you are not ready.

Buying is usually cheaper & you are INVESTING. Renting is throwing your money away. My Mortgage is 1400$ a month. Now if I were to rent a house for 1400$ it wouldnt have all the bells and whistles this place does ! It's usually not comparable. Buying is an investment. I would never ever rent.

Edit: Im also a landlord.. so I do recommend renting haha! But the tenets I've had are usually those who have Poor credit.