Consider Your Real House Payment

Housing values are finally dropping to the point in which it may be cheaper in some areas to actually purchase rather than rent.  Make no mistake, this is a good thing.   It was scary enough with house values so far above the cost of renting.

When factoring the true house payment you must take all factors into consideration.  When you pay rent it is reasonably cut and dried.  You make a rent payment to your landlord and either you or the landlord pays utilities. 

What’s good about this is it is nice to have this no brainer as a comparison.  When factoring your house payment it will be very much determined by the sale price, down payment and the interest rates of the day.

Also, you will need to pay for property taxes and insurance.  Some states have painfully high property and insurance rates whereas others are very light.  Your mortgage company will generally split the tax and insurance payment up into 12 equal parts and you will make this payment to your mortgage company every month along with the principal and interest payment on the mortgage.  Once a year your mortgage company will pay your insurance company and twice a year it will pay the county property tax.

The last factor is to determine how much money you will save on your taxes each year for the property tax and mortgage interest write-off.  Let’s say you determine you will have a $1,500 mortgage payment which includes principal, interest, taxes, and insurance (PITI).  Let’s compare that to a $1,200 rent payment.  Let’s assume every month you can write off a total amount of $1,200 for taxes and insurance, and your are in the 25% income bracket. 

That means you will pay $300 less every month in taxes than you are currently accustomed to paying.  This means your rent and mortgage payment are exactly equal.  Your rent is $1,200 per month and your mortgage payment after your tax deduction is $1,500 minus $300 = $1,200 per month.

Consider these items when comparing renting to buying.  Times are changing for the better.