As a Florida mortgage banker, one of the debates that rage between two first time home buyers is whether or not it is cheaper to rent than to own a home. We hear it — all the time.
While we know that it is typically cheaper to own, (after all, we’re in the numbers game!) we still like to periodically test various markets and put theories to timely tests. I guess it’s our version of “Mythbusters: Mortgage-Style!”
So we pulled a random sample from the Pinellas-West Pasco MLS in Florida and did a side by side analysis.
We took a three bedroom/2 bath home in Clearwater Florida with a listing price of $100,000 and a heated square footage of 1,576 square feet; Subject A in our investigation.
The three rental properties were in the same vicinity:
Subject B: 3 bedrooms, 1 bath, 1056 square feet
Subject C: 3 bedrooms, 2 baths, 1248 square feet
Subject D: 3 bedrooms, 1.5 baths, 1189 square feet
For Subject A we calculated a minimum down payment with an FHA loan and computed the principle, interest, taxes, and insurance that would be a part of the monthly payment to the bank.
So it is cheaper to own than to rent? Hell yeah!
- Subject A: Monthly Mortgage Payment – $842*
- Subject B: Monthly Rental Payment – $1000
- Subject C: Monthly Rental Payment – $975
- Subject D: Monthly Rental Payment – $975
Not only is it less expensive, but you can have a home to call your own with no landlord telling you what to do, the benefit from the interest write-off on your taxes, and have the opportunity to build equity.
At the end of the day, what can I say? Oh, that’s right! Myth Busted!
*Payment is for monthly Principal, Interest, Taxes and Insurance. Quoted payment is based on a loan amount of $97,465 at an interest rate of 5% for a 30 year term and has a corresponding APR of 5.977%.