Comparing the costs of buying a home and renting over three years.
Today I wanted to go over a question I get quite a bit, “How do buying and renting compare over time?” I went ahead and broke down what it would look like if you rented for three years versus if you owned a home for three years. It’s an interesting comparison.
The average rent in Jacksonville, Florida, is $2,000 a month for a 2,000 to 3,000 square foot home. You‘re going to pay out $72,000 over three years. Keep in mind that your rent could increase each year. One of the advantages of purchasing a home is that your mortgage doesn’t change. Once you buy a house, you can lock in your rate for 30 years, and it won’t change unless you want it to.
“If you rent, you have no equity after three years.”
If you buy a $375,000 home in Jacksonville, Florida, you have to factor in two things: the down payment and the monthly payment. The down payment will need to be around $25,000, and that would give you a monthly payment of $2,383, which includes your taxes, insurance, etc. Over three years, the costs will come out to around $110,000.
Renting would cost you $72,000, while buying would cost $110,000. However, if you rent, you have no equity after three years. You also can’t sell your home to make any money back.
If you bought a home for $375,000, it would be worth $434,000 after three years, assuming prices appreciated by 5% per year. After three years of payments, you would still owe $339,000 on that property. This brings your equity to $94,000.
You have two options: Rent and have nothing after three years or purchase and have $94,000. If you have any questions about this comparison or real estate in general, feel free to call or email me. I’d love to hear from you.