To Rent or to Buy: That is the Question

08.06.06 | Money | 0 Comments | by junger

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Without a doubt, one of the biggest questions coming up for the wife and I is whether or not our next living situation will be in a rental or a condo. Right now, we are renting, and our rent is pretty expensive.

Now, we love our apartment and the neighborhood is great, but obviously we'd rather be investing in something that we can call our own, rather than giving our landlord our hard-earned dollars. One of the reasons that we are penny-pinching now is so that we will be able to buy sooner rather than later.

Then I had a conversation with a buddy of mine.

He's been saving up money pretty well over the past couple of years, and he just recently moved. So I asked him whether or not he had bought his place or if he was renting, and told him that we would like to buy our next place. He said he was renting, and here's why:

Unless you move to a very low cost of living area, I doubt you're going to find a mortgage way below your current rent on anything other than a shack. Don't forget that you'll have to pay closing costs and maintenance. Maintenance is no trivial matter either. It's typically 1% of your house's value each year. Also, As you pay off your mortgage your initial payments go completely toward interest and not equity. The farther you get into your mortgage, the lower the percent of your payment goes toward interest and the more of it goes toward equity. All that adds up to mean that renting is cheaper unless you're going to stay in the same house for at least three years, five years would be better. I'm not willing to make that commitment right now, so renting is better for me.

Smart guy. We're hoping that we do stay in our next house for at least three years, but you do never know.

Should we be itching to buy a place and stop giving money to the man, or does renting just make more sense right now? Let me know your thoughts in a comment below.

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