To Rent or To Buy?
This is the question most people will face at one point of their life. It may be the biggest financial decision one will make and it certainly needs a careful thinking. If you are at this point in your life deciding whether to buy a house or keep renting, you’ll find there are tons of advice about this problem, from calculating the price to rent ratio to giving the pros and cons of buying or renting. Ultimately, you can only answer the question yourself: what would you do if you found a great house, will you buy it or just keep on renting?
Let the math help you decide.
What’s the Cost of Renting vs. Owning in Greenville SC?
Here’s a simple example of finding the difference of cost of owning a home in Greenville versus renting. Let’s say you buy a $150,000 home with zero downpayment. You’re taking on a$150,000 loan for 30 years at 4 percent interest rate. Say, you’ll also need to pay property taxes of 1% of the value of your house every year plus owner’s insurance. Put this all together and here’s what you’ll pay to own this house in one year:
Mortgage Payments |
|
| Loan Length (yrs): | 30 |
| Purchase Price: | 150,000.00 |
| Down Payment%: | 0.00% |
| Principal: | 150,000.00 |
| Interest Rate: | 4.00% |
| Total Payments: | 360 |
| Payment (P&I): | 716.12 |
| Owners insurance: | $58 |
| Taxes: | $125 |
| HOA: | $0.00 |
| Total Payment (PMIT): | $899.12 |
$899.12 x 12 months = $10,789.44
How much would renting that same house cost? We’ll assume the landlord owns it on similar terms, and he’s renting it for the following terms.
Rental Payments |
|
| Monthly Rent: | $1,000 |
| Renters Insurance: | $25 |
| Total Payment: | $1,025 |
$1,025 x 12 months = $12,300
Over the course of one year, you’ll pay about $1,511 more than you would if you’d owned the house. Now double or triple this amount if you are going to live in the same place for one or more years. If you owned the house, you would increase your net worth by $8,652.
Seeing these numbers, buying a house makes more financial sense than renting a home in Greenville.
In Brief
If you are thinking long-term and you plan to live in the house for a long period, buying a home is definitely the best option as it is cheaper, but if your focus is too short-term, renting is the better option. On the same note, also keep in mind that in Greenville, South Carolina, it would only take less than 2 years or 1.33 year to breakeven so if you plan to rent for the same time period, it is more financially advantageous for you to buy a Greenville real estate.
