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in response to renting or buying @ the simple dollar
WSA adsense code -->Trent at the simple dollar posted on comparing renting to buying a house. He suggested that when looking at similar standard properties,
- if rent exceeds the mortgage payment then a mortgage is (financially) better
- if rent exceeds the interest portion of a mortgage then its a grey area
- if rent is less than the interest portion of a mortgage then renting is better
In any case he suggests that if renting is a cheaper option, you should save or invest the difference towards a deposit. Trent does assume that your rent will only be less than the interest portion of the mortgage payment if you haven’t enough saved for a deposit which, I think, depends on how you define enough.
Anyway, I’ve compared my planned mortgage payment and rent to see how it stacks up.
Rent = £375
Mortgage = £493
Interest on Mortgage Initially = £400
It looks like I shouldn’t be buying at all, but continuing to rent. However, Trent actually states that you should consider the interest payment after 5 years as a fairer representation of the grey area. For my mortgage I have
Interest on Mortgage after 5 years = £370
Wow, thats a pretty close thing. I’m in the grey area by the skin of my teeth. Trent suggests that I consider the utilities, tax and maintenance issues to determine whether I should rent or buy. In my case, I can pretty much assume that the utilities and tax will be the same but maintenance and insurance costs will be higher.
I think this means that strictly financially speaking I’d be slightly better off renting and saving more money towards a deposit. Which goes to show that buying a house isn’t just a rational, financial decision for me. I already knew that it was a marginal decision but I want a place of my own and I’m prepared to pay for it.
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8 comments for “in response to renting or buying @ the simple dollar”
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The post is very useful,it helps me a lot,this is the thing that people really want to know,thanks for sharing. I am following you.
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Perhaps this is one of the most interesting blogs that I have ever seen. Interesting article, Funny comment. Keep it up!
I did not get this one: “”if rent is less than the interest portion of a mortgage then renting is better”.
Can you pease elaborate on it?
Nice to see that you have really gone over the math for this, hopefully you are able to be in a better position to buy yourself a house, its definitely not something you should not risk going into, and something you have to wait for the right time.
-Jean
are able to be in a better position to buy yourself a house
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