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Old 12-11-2008, 08:57 PM
 
Location: Silver Spring,Maryland
884 posts, read 2,397,992 times
Reputation: 631

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My husband and I live north of DC in MD. We are saving money and are currently renting. Since this is a high cost of living area-it is a better deal to rent. Am I wrong? Please don't tell me I am throwing money away by paying rent because the same applies to buying gas (especially when it was $4+ a gallon).

We looked at some places that are $400k (ouch), going cheaper gets you in the hood, or an old fixer-upper and that would be a mortgage of $3000+. How these sales agents mention this with a straight face just amaze me. How do young 1st buyers do it? I would be paying double what I now pay in rent!. The tax advantage is like $700 so that isn't even a deal to me. Am I missing something.
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Old 12-11-2008, 09:22 PM
 
31 posts, read 104,316 times
Reputation: 12
Its the same things for NYC. The way I've been rationalizing it is you are investing your money instead of throwing it into the air (sorry) and you can write off your mortgage which helps with taxes. And for me its a better quality of life to stop living in an apartment. I don't really know if its true because it all depends on 30yrs from now, will I be able to sell it at a price that will equal the principle and the interest I've paid all in total.

So potentially, 30yrs from now when I sell, I'll be that much richer instead of that much poorer (if I had rented instead and flushed money down the drain instead... that is money you'll never see again) I've saved for over 10yrs to put a good solid down payment. Am I doing the right thing? I am still not sure but I gotta do something...
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Old 12-11-2008, 09:41 PM
 
Location: Silver Spring,Maryland
884 posts, read 2,397,992 times
Reputation: 631
Ok. I can buy the quality of life angle. I'm just confused because I am from the midwest and buying made way more sense that renting. I have NEVER seen a house as an investment because it is a house. Its is something you live it. It does not make you money as long as you owe the ban. You NEVER truly own a house. Try skipping out on your taxes and see how fast the county takes your house. Here I see houses that are in bad shape, they need major upgrading, many look like the Brady Bunch house. These folks want $400k+ and they are not budging on prices. Houses are in foreclosure and those on the market just sit there. Value is going down so those that bought in 04' are losing money and God help them if they must sell.
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Old 12-11-2008, 09:52 PM
 
Location: West, Southwest, East & Northeast
3,446 posts, read 6,670,895 times
Reputation: 868
There are a lot of good calculators that can be used to determine whether renting is better than buying. Sometimes it does indeed make more sense to rent. Google search for these calculators. Some people may be very surprised with the outcome!
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Old 12-11-2008, 09:54 PM
 
Location: WA
5,453 posts, read 21,798,560 times
Reputation: 6125
I have done the analysis for myself more than once and it is almost always cheaper to rent. I still buy because that is the only way you get full control to modify the property.
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Old 12-12-2008, 01:49 AM
f_m
 
2,289 posts, read 7,620,554 times
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The main benefit is that once you pay it off, you have no more monthly payments. That is great when you retire, so you can significantly lower your living costs. Otherwise, what will rent be at retirement age? Beyond affordable?
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Old 12-12-2008, 02:45 AM
 
Location: NH Lakes Region
387 posts, read 1,441,251 times
Reputation: 504
If you think you'll be staying in an area for an extended period of time (especially now), it almost always makes more sense to buy than rent. Many of the previous "posters" had the main points: freedom to do what you want with the property (unless you are stuck with an association nazi group), tax benefits (look long term, not just month-by-month), retirement lower cost of living (either because it's paid off, or you were able to sell it and move somewhere else and possibly buy outright), better control over payments (unless you get an adjustable rate mortgage, your monthly payments will only increase as much as your real estate taxes and homeowners insurance in your escrow) so you can budget, and (assuming you are not in a condo), you are not going to be completely surrounded by possibly transient neighbors... how many folks have moved into apartment complexes, only to get comfortable and then have the neighbor from hell move in upstairs?

For me, my biggest reason is that I did not buy a house, but I was creating a home. I have unlimited options for what I can do with decorating, upgrading, and getting it totally comfortable for when I can finally retire. I bought what I could afford, knowing that I would need to make some upgrades and repairs, but there was nothing that I could not do gradually (ok, the roof was an immediate issue, but I dickered down the purchase price by factoring that in). I realize that it depends on the person as to how important things like that are, but to come home to something that is truly yours is sure a nice feeling, after having lived in apartments for years. I'm dumping as much as possible extra on principle, so I can have it very nearly paid off when I punch out of work for the last time... thereby having a much reduced retirement cost of living.

I have a friend, though, that would not buy a house on a bet - doesn't want the hassles or responsibilities of dealing with repairs and taxes and upkeep. The financial aspect does not come into it at all for her either, but for totally different reasons than mine.

The bottom line is that MOST of the time long-term finance-wise, there is no real question that buying makes more sense than renting, as long as you are buying what you can afford (and I guess right now, you really don't have to worry about totally inflated prices in many areas. Even in the DC area and such, there are affordable areas out there).

Good luck!
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Old 12-12-2008, 03:29 AM
 
Location: The land of milk and honey...Tucson, AZ
303 posts, read 1,448,669 times
Reputation: 225
You're not throwing your money away. You have to sit down and do the math i.e. how much money you're going to put down on the house, the monthly payments, the property taxes that you'll have to pay and the maintenance of the home. In an apartment maintenance is taken care of for you by the landlord, you don't pay property taxes and your rent will be significantly less than a mortgage payment.

A lot of consideration should be taken if you're going to live in the home for longer than five years, if not, you're definitely better off renting.
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Old 12-12-2008, 10:52 AM
 
Location: Vermont
5,441 posts, read 15,043,710 times
Reputation: 2641
Quote:
Originally Posted by Bigbluelandrover View Post
My husband and I live north of DC in MD. We are saving money and are currently renting. Since this is a high cost of living area-it is a better deal to rent. Am I wrong? Please don't tell me I am throwing money away by paying rent because the same applies to buying gas (especially when it was $4+ a gallon).

We looked at some places that are $400k (ouch), going cheaper gets you in the hood, or an old fixer-upper and that would be a mortgage of $3000+. How these sales agents mention this with a straight face just amaze me. How do young 1st buyers do it? I would be paying double what I now pay in rent!. The tax advantage is like $700 so that isn't even a deal to me. Am I missing something.
It all depends on many things. I think for the most part it comes down to how long you are wanting to stay in one place. If you just figure for example, you move into a place for 400k, live in for 8 years and its then its worth 500k. Even if you put 100k into it fixing it up and maintaining, paying taxes, and paying additional homeowner insurance over renters, you basically lived there for free. Ok maybe not free, but what can you say about the money you are spending on renting? How much is your rent? Second of all you get something in owning that you will never get renting, that is freedom to do what you want with the place... and possibly you get your own yard, more privacy, more space, etc. All that being say i will attest that owning a home, especially an old fixer upper, is very stressful, time and money consuming.
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Old 12-12-2008, 12:09 PM
 
48,509 posts, read 85,640,514 times
Reputation: 18103
I thnik it depends on you situation. In most areas the better places to live have no rentals. There is also the have to move thign that always happens with rental. The the rising cost of a decent rental. Most want to own their own home by the time the retire to keep cost fixed and lower.If your rich it really is up to what you like.
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