At what income level does it just make no sense to keep renting?

Question

Is there a particular income level where you just lose way too much money renting an apartment as opposed to buying your own house? Take into consideration the tax-deductible mortgage interest payments. Equate home equity with cash savings.

Answer 1

If your rent is close to a or exceeds a mortgage payment. In NY where I'm from there are upper class neighborhoods where renting does exceed a mortgage payment. In NYC rents are easily $3k-5k a month where you can easily buy a property outside for the price of renting.

Answer 2

Rent vs Buy decision should not depend on income level, but depends on the cost of renting vs the cost of owning a home in the location that you desire to live in.

Remember that the total cost of owning a home includes mortgage, interest payment, property tax, insurance, homeowner association fees, the utilities such as garbage and water that's already included in your rent, and the LOSS of interest you would've earned on the down payment you just made. Give yourselve credit for about 1/3 of the morgage interest you've paid (ie. if you paid $6000 interest, give yourself $2000 credit) to reduce the cost of home ownership. Now compare all this cost to the cost of what you pay in rent.

If rent is still more than 50% of the cost of owning a home, then it's a definite buy. If rent is in the 25-50% range of ownership, I'd consider a purchase.. If rent is less than 25% of the cost of ownership, then take a good look at your purchase as well as the real estate market as a whole and see if a rising market can make it worthwhile. If your rent is less than 10% of the cost of ownership, congratulations as you must be living in a rent controlled unit and it would be better off if you keep on renting. Save your money for a possible income-property investment down the line.

Answer 3

it's not the income level it's the monthly payment amount. Go look at a couple of houses or cruise the internet. Many realty companies are showing you what your monthly payment would be on a new house for 30 years or whatever. Since most mortgage payments include real estate taxes and insurance you will have to make the comparison accordingly. Add your monthly rent and renters insurance for a more direct comparison.

Answer 4

depends on where you live... with rates at where they are now, though, i think it makes as much as sense as possible to borrow to the max right now. and the best way to get the most leverage is a mortgage on a house, a thirty year. as much money and as much time as you can get. money's soooooooo cheap right now.

in that case, pretty much everything you pay the first few years of your mortgage is interest, so almost the entire thing is deductible. let's put it this way-- i lived in malibu for a while and payed over $3000 a month in rent., none of which was deductible. i own a much sicker place for way less (afer tax) now in san diego!!!!

does that help? i just figure it's a matter of crackin' the monthly nut. i think real estate values will be ok, maybe not great, but ok-- and for most people, that means an opportunity to save tax-wise.

good luck.

Answer 5

This depends on where you live. There used to be generalized advice that said owning is better than renting. That MAY not be true in all situations. Do an analysis between your liabilities as a renter vs. your liabilities if you were to purchase a home. If you are intent on purchasing, learn some creative ways to do so without losing the shirt off of your back. It comes down to education of the marketplace...

Answer 6

Depends on where you live, but if you were in Los Angeles and you were renting a 2 bedroom apartment, that would cost you around $1500 in rent per month. So if you were making about $5000 or more per month(after taxes), buying a house would make more sense and it would be a good investment.

Answer 7

Everybody cannot afford to buy a home. That's why I am looking for affordable housing. Any other suggestions. Seeking affordable housing in Pennsylvania. Hud has Section 8 but the waiting list is over two years long or longer..

Answer 8

not at present yet there are situations which you are able to imagine the place i might like if the Euro lost all its value because of fact our leaders tousled the economic device or wasted too lots materials on conflict. Or if i did not have the prospect to instruct myself because of fact a central authority enable the wide-unfold public education device become worse and private faculties have been too costly. ultimately you're to blame to your income point first and extra suitable yet no person lives in a vacuum. If the guy outlaws your line of enterprise the following day i'm rather specific you will blame them to your income point

Answer 9

Here's a link which will help you decide whether renting or a mortage would make more sense for you. It has a mortage calculator as well as a comparision rate for which lenders have the best loans.

Answer 10

I bought a manufactured home lived there a few years then sold it to buy a house.