Renting vs. Owning a Home: - Housing is the largest expense. - Approximately 1/3 of a person’s budget is spent on housing - Reasons for making housing decisions include - Personal and financial goals - Personal values, needs, and wants - Amount of money available for housing costs. - Financial resources and readiness - Credit history - Real estate prices - Location preference - Expected length of stay in particular place |
Renting:
- 3 costs of renting - Monthly rent - Security deposit - Utilities- electricity, water, garbage, etc. - Renter’s insurance - Lease: - A legal contract between the tenant and the landlord, specifying the responsibilities and rights of both parties. - Identifies the rent amount, security deposit amount and specification, payments, for utility bills, late payment penalties, length of lease, eviction terms, etc. - This is between the landlord and the tenant |
- Landlord: - Owner of the rental property - May perform management duties or hire a property manager. - Property manager- may charge a fee to the landlord to perform the management task - Duties may include: - May collect rent and deposits, pay utility bills, complete repairs and maintenance, watch over the property, respond to tenant complaints, assign new tenants, etc. - Tenant: - The person who rents the property - Renters are generally: - People who choose not to own a home. - People who cannot afford to own a home. - The tenant pays rent to the landlord which allows them to live in the rental property. |
- 3 advantages of renting: - Low move-in cost - Fixed monthly expenses - Easy to move - Location choices(may be close to work or school) - Less maintenance and repair work - Fewer responsibilities - May offer extra amenities such as a tennis court or pool. - Typically less expensive than home ownership. - May be able to save for other wants or needs if renting a less expensive apartment. - Other expenses may be included in rent payment such as electricity, water, sewer, and/or garbage. - 3 disadvantages of renting - Subject to terms of a lease - Rent may change with little notice - Less privacy and transient neighbors. - Restrictions on noise level, pets, etc. - Fewer opportunities to upgrade apartment such as new carpet, paint, or wallpaper. - When leaving a property, no equity is returned as it would be if selling a home. - No tax deductions. - May lose rental if the property is sold. |
- Home Ownership: - The buyer has purchased a housing unit as property - Goal of many Americans - A large financial decision - Owning a home is an investment because if a person sells a home for more than what it was bought for, the person makes money. This is called equity. - Financial planning and savings can assist a person in planning for the benefits of home ownership later in life. - Equity: - Owning a home is an investment because if a person sells a home for more than what it was bought for, the person makes money. |
- Collateral: - An item promised to the lender if the borrower does not pay back the loan, usually the home. - What percentage of the purchase price is a down payment typically? - 10-20% of the purchase price of the home. - What is the recommended purchase price an individual should pay for a home? - 2.5 times their annual household income. |
- 3 advantages of home ownership: - Build equity which can be borrowed against if necessary. - Pride of ownership - Feel more comfortable and have more privacy. - Stable mortgage payments - More room and storage - Improvements of buyer’s credit rating - Income tax deductions for property taxes and mortgage interest. - Potential for property to increase in value. - Free to make home improvements and have pets (items typically not allowed in rentals). - 3 disadvantages of home ownership: - Large down payment - Move in costs - Insurance costs - Possible for property to decrease in value - Time, money, and energy commitment - Repair and maintenance costs - Property taxes can raise substantially - Money is tied up in the home - May take several months to sell a home if trying to relocate. |
Housing Video:
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