Buying a Home versus Renting A Home

Before you decide which option is best for you, let’s look at the cost difference in upfront cash, monthly payments, repair and maintenance expenses and projected investment results before you make your decision to purchase or rent during your military tour in the San Antonio area. Please be assured, after you have considered all the benefits I present of home ownership over renting, and the timing just is not right for you and your family, I will be more than happy to assist you with finding a great rental home in the area.

Buying a home:

Closing Costs:

This depends on the type of loan you and your lender decide is best for you. There are several loan types to choose from, with options available for you to purchase a home without having a down payment. In addition, there are several ways to include cash closing costs into a loan. I have included a separate list of these loans and the typical closing costs associated with each type.

Monthly Payment:

Your monthly mortgage payment total will be a combination of several amounts. First, will be Principal and Interest based on the amount borrowed from a lender. Second, your lender will usually require you to escrow (which is a no-interest account they place it in) your property taxes and homeowners insurance premium. Finally, some conventional loans require mortgage insurance depending on the amount of money you put down. Here is a typical breakdown for a $175,000, 30-year loan at 6.25% with annual property taxes at $3,600 and homeowners policy at $900:

Principal & Interest:

Property Taxes (fluctuate mainly based on school district):

Homeowners Insurance Premium:

Remember, this dollar amount does not yet discuss the tax advantages of homeownership over leasing. I’ll discuss that further down.

Repairs & Maintenance:

First of all, keep in mind you will have an opportunity to have a professional home inspection done on any property you buy. You’ll know up front if there are any major repair issues that you would be likely to inherit. You can cancel your contract if those issues are outside your level of comfort. In most cases, our standard contract requires the seller to repair any major items prior to closing and to ensure all systems, appliances, plumbing and electric are in operating condition on the day of closing. You can also request the seller purchase, at their expense, a home warranty, which will cover your new home, during the first year on the biggest and most expensive repairs so you will not have any big surprises or large expenses. Even when the home warranty period is over, and you chose not to renew it at your expense, put it in perspective…the average costs of major repairs will still pale in comparison to the your property appreciating at an average of $1,000 a month (Explained further down).

Renting a Home

Security Deposit, First Month’s Rent & Fees:

Most properties require a one-month security deposit and the first months’ rent to be paid with the application fee. Application fees range between $50-$75 and are non-refundable. Most rental properties do not accept pets. For those that do, pet deposits range between $250-$500.

Monthly Payment:

For comparison purposes, using the same criteria listed above in the mortgage payment for a home purchase, average rental would be ?. Remember, you’re monthly rent amount is actually making your landlords mortgage payment AND will also include whatever profit margin required for that investment (typically between 10% - 20% mark up of what the landlord actually pays out of pocket for his investment you are helping to fund.

Repairs & Maintenance:

It is common for Landlords to charge a repair deductible of $50 - $100 per service calls for repairs. In addition, you will be required to provide liability insurance, “renters insurance”, for the rental property. This insurance is very affordable ($200/year) and is available from most major insurance carriers.

Bottom Line: Why Should I Buy instead of Rent?

There are lots of benefits to home ownership to be considered before you decide to buy. From keeping your cherished pets, to being able to settle in to customize and decorate your own place without a Landlord’s approval, there are several areas to consider.

Tax Benefits:

Interest and Real Estate taxes are tax-deductible expenses; rent is not. In addition, if you are active duty, you are receiving tax-free money provided by the government for your housing (BAH) to pay, or offset, your mortgage or rental payment. If you own your home, this means you are receiving tax-free money you are able to take a tax deduction with! Individual tax benefits will vary based on your income and tax rate, however, in most cases you can actually put more money in your pocket each month by raising your deductions to allow for the deductible items in your mortgage payments.

Property Value:

As you may have heard, San Antonio Real Estate is one of the hottest markets in the nation and had a jaw-dropping year in 2006. Better yet, there is every indication this trend will continue for years to come. According to Fortune magazine, San Antonio was the nation’s best real estate market in 2006 and, in addition, the 2007 forecast still has it ranked in the top three cities to experience continued growth and appreciate at rates far above the national average. San Antonio homes are appreciating at an average between 4% - 7% a year, depending on location. That means the $175,000 home used in our earlier comparisons would actually appreciate between $580 and $1,025 every month! Another fantastic advantage is that most residential home sales are tax-free. This means that the financial gains you accumulate on your home over the years are tax-free, giving you additional tax-free savings to the ones previously mentioned.

Now What?

As you can plainly see, compared to renters, homeowners will reap the benefits of savings for years to come. As I mentioned in my introduction, after you have considered all the benefits I present of home ownership over renting, and the timing just is not right for you and your family, I will be more than happy to assist you with finding a great rental home in the area. My husband and I have purchased and sold many properties over the years when relocating to the next duty station, and we can personally vouch it has been more than worth our while both financially and emotionally over the years. I truly look forward to helping you and your family find your perfect home and make your relocation to San Antonio as fun and stress-free as possible.