House vs apartment long term.?
How long would it take to be "throwing away money" with an apartment? Assume 150k for house tops, 30 year mortgage or no more than 1000 a month for the apartment for my area. At what point of ownership would the house be better financially? No wife no kids.
- A.J.Lv 73 months agoFavorite Answer
The real deal requires a lot of calculations and estimates. I need to make a lot of guesses based on typical numbers. If you were comparing rent vs buy on a house, that is one set of numbers, but renting an apartment and owning a house involves many numbers, some with assumptions and estimates.
Apartment - One year leases, rent can be raised each year usually subject to supply-demand. Not responsible for repairs or maintenance other than damage caused by renter. Insurance is only on contents. Able to move without selling a property. Community services common. Often smaller living area. Usually trash removal and water included in the rent. Heating and air conditioning generally cheaper than in a single family house. One month security deposit and first month rent typical to move in. Gross pay 3x rent to qualify typically.
Owning a house - Down payment equity generally required to get a loan. Interest rate based on credit rating. Gross pay 3x loan principal, interest, property taxes, home insurance, Homeowners ***'n fee to qualify plus all debt including this limited to 39% of gross pay. Principal, interest, loan insurance, homeowners insurance, property taxes, HOA if any are monthly payments plus ALL utilities. All maintenance and repairs inside and outside responsibility of homeowner including pests and insects. Moving generally requires sale of the home. Advantage in that land values usually rise. Can upgrade for value improvement, but usually involves your own labor. Repairs with your own labor helps costs. Subject to neighborhood improvement or degrading in land values.
If home is only $150K and apartment is $1000 a month, they are probably comparable in living area, but home condition usually a bit dated and worn.
Will use this amortization
FHA loan first time buyer 3% down payment $4500 with $300 buyer's fees paid and $300 buyers fees folded into loan. $145,800 30 year loan.
(Additional payments for property taxes and home insurance also required at purchase close). 5.062% APR with mortgage insurance included.
$788.22/month principal + interest
$162.50 estimated monthly property taxes
$60/month estimated homeowners insurance
assume zero Home Owners Assn
Total $1010.72 per month
Add $50 per month in additional utilities compared to an apartment
Add $39.28 per month maintenance supplies not in apartment
No upgrading included nor major repairs.
Cost $1100 / month
After 5 years, an average-low amount of time owning it, assuming the $1000 rent gets some increases.
$3000 cash payments higher on house than apartment.
Home value typical $172,500 minus 6.5% selling costs $161,287.50 net
$134,003.55 loan principal
$27,283 cash. minus $3000 extra costs of home ownership over rent
$24,283. minus $4800 initial down payment cash outlay
$19,484 profit over 5 years or about $325/month
It assumed a 3% rise per year in property value.
If no value rise, you lose money at about $25/month.
In a 5 year period, most of the gain is in property values rising, upgrades you do yourself, and other preferences of owning versus renting.
Also, sometimes, home values fall.
- Beverly SLv 73 months ago
Every time you pay rent you are throwing away money. A house gains value & when you sell it if you do you actually make money since you sell it for more than you paid.Source(s): Mortgage lender 33 years.
- realtor.sailorLv 73 months ago
You're not "throwing away money." Mortgages would be basically the same. The difference is do you want to be maintenance free or not and do you want to be on top of your neighbors.
- PearlLv 73 months ago
i would think a house would be quieter than an apt but its up to you what you want to do
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- Landlord365Lv 53 months ago
Rent is not throwing money away & buying a house is not always cheaper. Each one has its own advantages.
Renting: You are not throwing money away because you have to live somewhere! You do not pay for any maintenance, taxes or insurance.
Buying you have to pay the mortgage, taxes, insurance & maintenance.
- GA41Lv 73 months ago
The answer will vary tremendously with assumptions. How much is the interest on the mortgage? How much is the rent? Do you expect the value of the house to appreciate? what is the appreciation? Will you sell the house short term, or will you keep if for the length of the mortgage? What are the costs to maintain the house? What is the value of the house versus how much you pay for it? All these assumptions factor in to whether it is better to rent or buy.
- .Lv 73 months ago
The usual rule of thumb is three years, but it depends on your local real estate market.