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I was crunching figures today and it seems to me like the cost of owning the home is just a little more than the cost of renting....
Assumptions are made as follows....
Mortgage $2000 per month
Taxes $600 per month
Utilities $400 per month (electric + oil, avg for the year)
Home Insurance + PMI $250 per month
Misc. stuff like lawn mowing and other expenses - $150 per month.
---------------------------------
Total = $3400 per month
I estimate to get $1000 back every month at the end of the year by way of property tax and interest exemptions. (This is a good estimate for my personal situation)
So per month it comes to about $2400.
-----------------------------------
I checked last week and it costs me about $1600 to rent a 2 bed apt today. I guess we can average it to $1700 for the next 5 years + $100 for utilities = $1800 per month.
So its a difference of roughly $2400-$1800 = $600 per month....
Now if you look at the principal going into the house for the first 5 years its about $400 per month. So in effect its just $200 more to own a house ????
Anything wrong with this picture ?
Note: The tax figures are not generic, but its specific to my situation. Also assuming I'll get the MCC program approved for me, else you can add another $250 per month to the expenses, so it will be $450 more to own the home.
Also, please do not suggest to compare the house to a similar size apartment or cost of renting similar house, I am strictly comparing to a 2 bed apartment in the same area as that is what I would be doing if not buying a home. I would want to save if I'm not buying the house.
I was crunching figures today and it seems to me like the cost of owning the home is just a little more than the cost of renting....
Assumptions are made as follows....
Mortgage $2000 per month
Taxes $600 per month
Utilities $400 per month (electric + oil, avg for the year)
Home Insurance + PMI $250 per month
Misc. stuff like lawn mowing and other expenses - $150 per month.
---------------------------------
Total = $3400 per month
I estimate to get $1000 back every month at the end of the year by way of property tax and interest exemptions. (This is a good estimate for my personal situation)
So per month it comes to about $2400.
-----------------------------------
I checked last week and it costs me about $1600 to rent a 2 bed apt today. I guess we can average it to $1700 for the next 5 years + $100 for utilities = $1800 per month.
So its a difference of roughly $2400-$1800 = $600 per month....
Now if you look at the principal going into the house for the first 5 years its about $400 per month. So in effect its just $200 more to own a house ????
Anything wrong with this picture ?
Note: The tax figures are not generic, but its specific to my situation. Also assuming I'll get the MCC program approved for me, else you can add another $250 per month to the expenses, so it will be $450 more to own the home.
Also, please do not suggest to compare the house to a similar size apartment or cost of renting similar house, I am strictly comparing to a 2 bed apartment in the same area as that is what I would be doing if not buying a home. I would want to save if I'm not buying the house.
Can you put down a higher dp? It is probably better to avoid the PMI and that way too you'd have less of a monthly payment.
IMO, buying is always better. Yeah you can't predict market trends, but with renting you will ALWAYS lose money. With buying there's a chance you will, chance you wont...but you have the option with buying to hold onto it or sell and some point you will probably make money on it.
10-14-2009, 04:33 AM
grant516
n/a posts
There's a billion variables to consider in the situation-
In a lot of cases, such as yours though- it shouldn't be a rediculous amount more money to own than it is to rent.
One issue seems to be that rents on LI are pretty pricey ESPECIALLY for what you get. Most people are still paying rent rates from a few years back, when houses have knocked about $90K on average from their prices.
We have a 2 bedroom apartment we rent in nassau for $1500 which includes heat,etc.
I would say your mortgage "guesstimate" looks good for a house of $400k. But I think your taxes look too low, $7200 for a $400K home is really low for LI. I would also add more for your utilities @ $400/month. I know some people that have $400 LIPA bills alone. Your also forgettiing the cable/phone/internet bill of roughly $130/month.
I can't speak to your property tax interest and exemptions estimate (which seems a bit high to me), but I can say that your utilities seem a bit low to me and you have put nothing aside for home maintenance costs.
For instance, last week when it was windy, a limb from our huge maple tree broke and crashed onto the roof that covers our extension. It knocked down some gutters, but could have been worse. When we climbed up there ourselves to remove it (did you factor in for a ladder?) we noticed that some of the shingles were loose and there may be some pre-existing water damage to the roof. This damage wasn't there seven years ago when we had our inspection, but things happen over time.
Since we've moved in, we've replaced a gas dryer, a refrigerator, a couple of windows, and the part of the roof that covers our foyer (for lack of a less prissy word). We had some electric work done, the septic tank pumped and now we are looking at calling a tree company to come and assess the relative of this tree that is poised to do more damage to the house. Taking it down would not be cheap. Oh, and my house desperately needs a power washing to remove the moss from the north side of the house.
You might be thinking, "But won't the insurance cover the cost of the gutters?" From the stories I've heard from other homeowners, if it's not more than $5000, you don't even want to call them because they will raise your rates.
When we bought in early 2003, our school district (Pat-Med) was about 70th percentile in NY (based on test scores). For the next couple of years, we enjoyed seeing our property value rise (on paper) and we took out a small HELOC to address some of those maintenance issues and to rehab the broken kitchen cabinets, which we never got around to doing before the bank froze the equity line. It didn't freeze our line because of our credit history, but because the bubble popped and the property values of the houses in our area tumbled.
My house, which was "worth" $340,000 in 2006, is now worth about $225,000, which is less than we paid for it and only barely more than we owe on it. Oh, and the school district? It's gone from 70th percentile to 17th, which affects re-sale value much more than the granite countertops that my neighbors had installed during the bubble years.
None of this would matter if we planned on staying for another 10 years, but that was not in our plan. Now, it may have to be, which is disheartening to say the least.
Also, property taxes seldom go down. I grieved my taxes this year because they were assessing us at the 2006 value. According to the comps I've seen, our property value has dropped by about a third, but our taxes? They were lowered only by 6%.
Maybe someone else on the board will have some sage advice or at least a link to a "how much does home ownership really cost" calculator. Good luck with whatever you decide.
Can you put down a higher dp? It is probably better to avoid the PMI and that way too you'd have less of a monthly payment.
IMO, buying is always better. Yeah you can't predict market trends, but with renting you will ALWAYS lose money. With buying there's a chance you will, chance you wont...but you have the option with buying to hold onto it or sell and some point you will probably make money on it.
I am going FHA, so no higher down payment possible. I am looking to atleast stay in the house for 7-8 years at least, so I guess its not a short term or a long term duration.
Quote:
Originally Posted by grant516
One issue seems to be that rents on LI are pretty pricey ESPECIALLY for what you get. Most people are still paying rent rates from a few years back, when houses have knocked about $90K on average from their prices.
We have a 2 bedroom apartment we rent in nassau for $1500 which includes heat,etc.
For us, ownership calculated to a lot higher.
You are so right, rents are really high compared to what you get here on Long Island. I live in suffolk and its $1600 for a 2 bed in my area, so I think you have a sweet deal going on for you in Nassau for $1500. And I'm sure it will be higher for you to own a house because Nassau houses are costlier then Suffolk.
I would say your mortgage "guesstimate" looks good for a house of $400k. But I think your taxes look too low, $7200 for a $400K home is really low for LI. I would also add more for your utilities @ $400/month. I know some people that have $400 LIPA bills alone. Your also forgettiing the cable/phone/internet bill of roughly $130/month.
Hi Rocafeller,
Its a 370K house, taxes $6800.
$400 per month or for 2 months ? My God.... $400 per month is really high.
My apartment averages about $60 per month for the whole year for LIPA.
I can't speak to your property tax interest and exemptions estimate (which seems a bit high to me), but I can say that your utilities seem a bit low to me and you have put nothing aside for home maintenance costs.
For instance, last week when it was windy, a limb from our huge maple tree broke and crashed onto the roof that covers our extension. It knocked down some gutters, but could have been worse. When we climbed up there ourselves to remove it (did you factor in for a ladder?) we noticed that some of the shingles were loose and there may be some pre-existing water damage to the roof. This damage wasn't there seven years ago when we had our inspection, but things happen over time.
Since we've moved in, we've replaced a gas dryer, a refrigerator, a couple of windows, and the part of the roof that covers our foyer (for lack of a less prissy word). We had some electric work done, the septic tank pumped and now we are looking at calling a tree company to come and assess the relative of this tree that is poised to do more damage to the house. Taking it down would not be cheap. Oh, and my house desperately needs a power washing to remove the moss from the north side of the house.
You might be thinking, "But won't the insurance cover the cost of the gutters?" From the stories I've heard from other homeowners, if it's not more than $5000, you don't even want to call them because they will raise your rates.
When we bought in early 2003, our school district (Pat-Med) was about 70th percentile in NY (based on test scores). For the next couple of years, we enjoyed seeing our property value rise (on paper) and we took out a small HELOC to address some of those maintenance issues and to rehab the broken kitchen cabinets, which we never got around to doing before the bank froze the equity line. It didn't freeze our line because of our credit history, but because the bubble popped and the property values of the houses in our area tumbled.
My house, which was "worth" $340,000 in 2006, is now worth about $225,000, which is less than we paid for it and only barely more than we owe on it. Oh, and the school district? It's gone from 70th percentile to 17th, which affects re-sale value much more than the granite countertops that my neighbors had installed during the bubble years.
None of this would matter if we planned on staying for another 10 years, but that was not in our plan. Now, it may have to be, which is disheartening to say the least.
Also, property taxes seldom go down. I grieved my taxes this year because they were assessing us at the 2006 value. According to the comps I've seen, our property value has dropped by about a third, but our taxes? They were lowered only by 6%.
Maybe someone else on the board will have some sage advice or at least a link to a "how much does home ownership really cost" calculator. Good luck with whatever you decide.
I hear you.... the variables come to bite you. I just feel that the more money you have to spare, the more you will put it on the home, I mean you can justify it by saying "its where I live" so its worth it.... I was talking in general and not about you specifically. I totally understand your predicament.... the house values are so much tied to schools that such a big drop that you experienced will surely have a big impact. Its crazy though that the taxes keep going high. I hope you can get out of your situation soon.
You have been there for 6 years now, in retrospect, with all that has happened, would you have rather rented for the past 6 years ?
Also, with what you have spent on the house, if you sell now do you break even ? Don't forget the 75-90k that you may have spent on rent in the past 6 years.
^^ True. But the home will be probably 2 times the size of your apartment which means more heating & cooling costs. Will probably have air conditioning, dishwasher, def. a heating system, hot water tank, outside lights, etc. Remember not to long ago oil was $4.00 / gal.
I was crunching figures today and it seems to me like the cost of owning the home is just a little more than the cost of renting....
Assumptions are made as follows....
Mortgage $2000 per month
Taxes $600 per month
Utilities $400 per month (electric + oil, avg for the year)
Home Insurance + PMI $250 per month
Misc. stuff like lawn mowing and other expenses - $150 per month.
---------------------------------
Total = $3400 per month
I estimate to get $1000 back every month at the end of the year by way of property tax and interest exemptions. (This is a good estimate for my personal situation)
So per month it comes to about $2400.
-----------------------------------
I checked last week and it costs me about $1600 to rent a 2 bed apt today. I guess we can average it to $1700 for the next 5 years + $100 for utilities = $1800 per month.
So its a difference of roughly $2400-$1800 = $600 per month....
Now if you look at the principal going into the house for the first 5 years its about $400 per month. So in effect its just $200 more to own a house ????
Anything wrong with this picture ?
Note: The tax figures are not generic, but its specific to my situation. Also assuming I'll get the MCC program approved for me, else you can add another $250 per month to the expenses, so it will be $450 more to own the home.
Also, please do not suggest to compare the house to a similar size apartment or cost of renting similar house, I am strictly comparing to a 2 bed apartment in the same area as that is what I would be doing if not buying a home. I would want to save if I'm not buying the house.
You are not getting anywheres near 1000 a month back at the end of the year for P&I so dont count on that.
Make sure you can get by without it.
Crooks
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