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Has the Home Buying versus Renting Finance Equation Changed?
In ‘normal’ times, astute doctors and financial advisors know it usually makes sense to rent a home – rather than purchase one – when the period of time you will stay in the home is short or undetermined.
Why? The reason for this is the high cost of purchasing and selling a home.
When a physician – or anyone else – purchases a home, he or she must pay an amount varying from the total price in cash to at least 0-3% down; and hopefully up to the traditional 20% or beyond to remove PMI – especially after the recent mortgage industry meltdown with today’s tight credit markets because of the sub-prime mortgage fiasco – despite the low IRs.
Recall, that about 13% of first mortgages that originated in 2005 and 2006 had down payments of less than 10%, according to the Mortgage Bankers Association. An additional 1% of the mortgages surpassed the value of the property.
And, if the home is purchased for cash, a majority of the expense of purchasing and selling comes in the selling via commissions and excise taxes.
Assessment
So, is the financial calculus changing in favor of home ownership, again? Why or why not?
Conclusion
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Filed under: Financial Planning | Tagged: Home Buying versus Renting, Is Home Renting for Chumps?, Mortgage Bankers Association |
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