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How to calculate rent vs. buy

By Judy Martel ·
Thursday, September 13, 2012
Posted: 6 am ET

Homes prices are affordable and mortgage rates are low, so should you make the leap into homeownership? Although 85 percent of Americans still believe in the dream of owning a home, about a third choose to rent instead, according to a Fannie Mae study.

Some of the reasons have to do with potential homeowners' confidence in the housing market and the economy, while others don't want to take on home maintenance and expenses. But if you're on the fence, calculate the numbers to determine the break-even point between renting and buying. To do that, add up the upfront costs of owning -- including taxes, association and maintenance fees and down payment -- and determine how many years until the total payments meet the cost of renting. Or you can use the Bankrate calculator on renting versus buying.

According to a recent report, it's cheaper to buy than rent in many major markets, especially since rents have risen due to increased demand. Chicago, Minneapolis, Baltimore, Denver and St. Louis are markets where buyers will break even in fewer than three years.

Are you on the fence about homeownership, or are you happier renting?

Keep up with your wealth and mortgages and follow me on Twitter @JudyMartel.

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September 13, 2012 at 12:49 pm


There are several options you could consider. If you are lucky you can find a seller financed home and avoid a down payment altogether. Those are hard to find though (look on For Sale By Owner sites).

You could also look into an FHA loan which only requires a 3.5% down payment but comes with substantial mortgage insurance payments.

Depending on your income there may be local down payment assistance programs that you can take advantage of.

Just shop smart and dont buy more house than you can afford.

September 13, 2012 at 9:42 am

I'd like to buy in Chicago, but my trouble is not enough money for a decent down-payment. I do have a stable job outlook and good income, just not a lot of up-front cash unless I raid my IRAs, which I really don't want to do...any suggestions on how to approach buying?