Owning vs. Renting - phase 3 ip - Essay Example

The bank is going to ask for a down payment. A down payment can range between 10 to 20%. Let’s assume I have the down payment money. The bank is also going to ask for closing cost on the mortgage. The average closing cost is 3%, but in certain states it can go up as high as 5% to 6% (Federalreserve). I am making about $4000 a month gross, but clean I’m taking home a little less than $3,000 a month. Assuming I put a 10% down payment the high price range of a home based on my salary would be $200,000 on a 30 year mortgage.

My mortgage payment assuming a 6% interest rate would be $1079.19 (Yahoo). After doing some research on the prices of apartments in our hometown of Austin, Texas I determined that I can find an apartment for rent for about $800. For example a two bedroom, one bath apartment at the Walnut Creek Crossing complex cost $805 a month (Apartments). A one room could be found for about $200 less per month, but it is better to have a second room for either a home office or as a guest room when friends or relatives come over.

Along with the mortgage or rent payment another factor that must be considered are insurance costs. The insurance costs are much higher for the buying alternative than for the leasing. Homeowners insurance is mandatory for people that have mortgages because in case of an accident that destroys the home somebody has to pay for it. Home owner’s insurance policy is divided into two parts: a) home insurance property protection, b) home insurance liability protection (Answers). Renters can also have insurance protection to protect their personal items in case of natural disaster, but this type of insurance is not mandatory.

Another cost to consider when buying a home is the state taxes that must be paid on the property on a yearly basis. After evaluating both alternatives I have come to realization that the best option for me at this point in my life is to rent