owning a house vs renting costs

Lifestyle Parenting, Household Affairs and Cuisine corner
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We have been thinking to buy a house and I have had discussions with couple of different people about the costs.
We are both working and with 2 kids half my salary goes to their daycare and preschool fee. More of the salary goes to other expenses, buying personal and other stuff for kids. So I do not save a lot of my salary.
My husband pays rent and bills but we save part of his salary.

Considering the costs, we know house will be more expensive but how much more expensive. The 2 people I discussed with gave opposite opinions. A friend who has family said they do not save at all and a single guy said he does. I am thinking we will be in the same situatarsion as the family and will end up saving nothing at all.
I know we need to decide what is more important to us. We are right now in 2 bedroom apartment and can move into a 3 bedroom apartment but that will increase our rent as well.

People who bought houses, how much more does a house add to expenses.
What about with single income ? Is is easily manageable ?

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Re: owning a house vs renting costs

Home insurance
School Tax
Home maintenance cost
Property Tax
Mud Tax
Monthly Mortgage (I believe you will not going to pick conventional mortgage if religious) (consider it like rent you are paying in your apartment.)
+ Utilities (which I believe you are currently paying in your apartment too)

again, your overall cost also depend upon the state where you live.

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Re: owning a house vs renting costs

we just bought a house and when we were looking, the key thing to us was to stay in our budget so our monthly mortgage including taxes, insurance etc diwasnt even a penny more than our current rent that we can comfortably afford.. does that mean that our options were limited? yes but do we have a peace of mind that we are not going beyond our means? A big YES!!

Upfront, it's expensive! We chose Islamic Financing and lets be honest, they are a lil bit more expensive than the conventional one.. we also worked with the regular bank to see the cost difference and while the conventional banking was more pocket friendly towards first time home buyers, such is not the case with the islamic financing!

If you have savings for at least 20% down payment, closing cost, home inspection fee etc.. then go for it!

Rest, yes be prepared to add in a lil bit more every month.. we plan to do some renovation including but not limited to replacing carpet with hardwood, painting the rooms, adding in a wall/door to make an office etc but we are okay with it since we knew that in good neighborhood,good schools etc we werent going to buy a perfect house but inshaAllah we will make it perfect for us!

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Re: owning a house vs renting costs

We are a single income family and we were renting before we decided to buy. Our apartment was fairly expensive compared to the avg, we paid 2100 in rent and our mortgage now is probably a little more than that but not much. The added costs for us are gas, water and cable/internet/phone. These things were negotiated into our rent when we were at our apartment. We also pay a HOA fee of $190 a month which covers landscaping and any exterior work needed on our home. Our property taxes are very high but that will depend on what state you live in.

The main reason for us choosing to buy rather then renting was because we felt like we were just wasting that money every month. It was going down the drain. Now that we've bought a house the money goes toward paying off our house and in the end we will own a property :) So we don't feel like we're wasting all that money anymore.

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Re: owning a house vs renting costs

^Totally agree!

and I had opened this thread when we started looking.. I absolutely love Khatti for giving me a million dollar advice which was, “dont be a house poor” We have had a very free living style and we wanted to keep it like that.. I had no intention of being cooped up in the house just because we couldnt afford to go out so keeping that in mind, we had a set budget for the price that we didnt want to cross when it came to home buying.. we didnt even look at the properties above our budget in case we liked it so much that we couldnt resist buying it. :smiley:

http://www.paklinks.com/gs/household-affairs-and-cuisine-corner/554684-first-time-home-buying.html

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Re: owning a house vs renting costs

My experience is that house adds up to 30% into your monthly cost. So if you are currently spending 1500, expect 2000.

But its not affording a house that hits you financially, its getting into one. If you have 20% down payment in your savings, by all means you should buy a house. If not, then wait.

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Re: owning a house vs renting costs

What do you mean getting into a house hits you financially ?
I am expecting the expense to go to atleast $2000 ..... I am not sure what is better to save the additional $500 each month and use it for some other purpose like saving for college fee for kids or spend the additional money and own a house 20 or 30 years later ???

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Re: owning a house vs renting costs

I meant down payment, closing cost, moving cost and all

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Re: owning a house vs renting costs

Buying a house will be the biggest purchase of your life but if you have a good sense of your finances then the decision should be pretty clear. Be conservative with Real Estate meaning stick by tried-and-true rules, like 20 percent down, 30-year-fixed-rate mortgage, and a total monthly payment representing no more than 30 percent of your gross pay. When you buy a house yo’ll see a big chunk of your saving go but your bank account should still have at least an amount that can sustain you in emergencies for 6 months.
Don’t forget that if you live in a house long term you are accumulating equity as oppose to rent. There are potential pitfalls of home ownership like the mentality of keeping up with the joneses and going overboard with home renovations and decoration etc. But if you are savvy with you finances it should not be a problem.

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Re: owning a house vs renting costs

But that is a one time cost.

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Re: owning a house vs renting costs

Isnt 15 year better than 30 year mortgage ?? I thought we will end up paying less if we went with 15 years.
Also 30 years is such a long time, we will probably be retiring by that time.

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Re: owning a house vs renting costs

I forgot closing cost (one time cost)
HOA is monthly/yearly. :chai:

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Re: owning a house vs renting costs

true. That is why i said that getting into a house hits you financially. As bebo said, if you can afford it then you should buy a house.

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Re: owning a house vs renting costs

Hmm not necessarily. You have to evaluate your financial situation, loan amount and mortgage rates. Statistically speaking, chances are that you won’t be staying in the same home for 15 years. First time home buyers move to a second home in 5 to 7 years give or take. There is no benefit to paying higher mortgage when you’ll be moving on.
With longer loan term, You’ll be able to save monthly and put that into other investments instead of putting all your eggs in one basket. Current interest for 30 year fixed in 3.6% and in lower interest environment, 30 years loan makes more sense.
But of course you have to do your own analysis of market and your investment goals. Here is an article that may help make things clear for you.
Choosing between a 15-year and 30-year mortgage

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Re: owning a house vs renting costs

Sarab, Money going in rent is a waste .. specially when you have kids and your requirement is not a studio or a one bed flat .. you need space for the kids and hence rent that you are paying is literally going down the drain.

Owning a house means you are paying the same cost towards your mortgage .. or maybe slightly more .. but that gives you the motivation to save .. coz eventually what ever you are paying in mortgage , you will get that money back even if you try to sell your home in the next five years ...

once you move into your own home, depends on you what you can or cant compromise on .. for example.. a friend recently moved to a 4 bedroom house .. they didnt spend much money on the house ( furniture and all ) , kept a tight control on the bills , three months after moving she realized two of the rooms were not as much needed for her family so they rented it out as a bedsit with a separate entrance .. that adds to them getting some extra income ..

its always better owning a house then renting .. renting is an expensive option ..

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Re: owning a house vs renting costs

Thanks for the article.

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Re: owning a house vs renting costs

ok what about investment properties .... anyone here owns one and is it easy to manage and do it ??

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Re: owning a house vs renting costs

Depends where you live.. depends who rents it.. depends how much money you have put in it.. for all investments, remember you have to invest first couple of years and then see results!

I dont have an investment property but I deal with landlords and tenats all day long.. the more accomodating plus sensible the landlord is, easiser it will be for them to manage!

you can also think about buying a duplex and renting one portion of it.. on site management is easier!

and you have to have a really good attorney to be a landlord otherwise rules and regulations are usually pro tenants!!! no one at my work shall ever know I said that :D

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Re: owning a house vs renting costs

i don't agree with this. so long as you are living in the property, how can it be money "down the drain"? you're paying for the benefit of a roof over your head! and why would you only rent a studio or 1-bed, esp if you have kids? Alhamdulillah we currently rent and we "own" the entire top floor of a huge house, and have 3 bedrooms. we have our own entirely separate entrance, a covered double garage, a fantastic patio for entertaining, and we're in one of the best neighborhoods in the city (average home prices are over a $1 million and its not something we could ever, ever afford to buy in, unless we won the lotto!). the schools in our area are also highly rated, and its very accessible via transit. so its entirely worth it to us rather than the alternative, which in our case would mean years of scrimping and saving and putting off living our lives, simply to own a piece of land which we would be committed to paying off and staying in for a while (because, lets face it, moving is a ***** and who wants to keep doing that every five years?).

land transfer tax, 20% down payment, real estate agent fees, home maintenance (inside and out), etc. etc. would all add up to a huge chunk of change that we don't have, and we likely won't have, for another few years at least. but then in the end, it just don't mean that much to us to say we own a home, so i don't know if we'll ever really consider it as something we want to do.

plus, if we ever got to the point where home ownership was something that interested us, we know we wouldn't want to compromise on the neighborhood we live in- its just too big and too important an aspect in terms of quality of life, and like i said, unless we win the lotto, i don't see us buying a home in our desired neighborhoods anytime soon!

so think about it again, sarab. speak to an investment advisor and consider all of your options. renting isn't evil, lol. sometimes it can be the better, stress-free option.

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Re: owning a house vs renting costs

^honestly it really boils down to your priroties! For us the priorties were good school, single family residential area, location near grocery, parks etc so we knew exactly where to look and believed that if we could afford the house for same price, it was better than paying rent that is basically paying for someone else's mortgage!

But you seem to be going for a neighborhood that you cant or dont want to buy a house in, it works perfect for you to rent and then move on when and if needed!

Sarad.. sgc is right, talk to an investment advisor, evaluate the pros and cons of owning a house just for your family, and then make a decision! Its not something that once you change your mind, you can go and return it :D

and be wise.. dont buy a house on variable rate or for less than 20% down payment..negotiate the closing cost, keep an emergency fund of at least 6 months of rent/mortgage payment etc With our expwerience, I can easily say it is a rocket science to buy a house!!