24 Sep The Advantages of Purchasing a Home Versus Renting
According to the real estate website Zillow, purchasing a home can pay off, on average, in just three years. In a new analysis they call the “break-even horizon,” Zillow explores the advantages of purchasing a home versus renting.
Chief among the reasons are building your own equity versus paying someone else’s mortgage when you’re renting. Their new valuation model is compares what it costs to buy or rent in the same home, and while it depends on where you live, much of the data suggests that buying is superior. For example, in Los Angeles and Orange Counties, 4.3 years is the point at which a buyer would break-even assuming they put 20% down on a home. But in upscale communities like Newport Beach where home prices are much higher, the numbers are much different. It would take a buyer approximately 14 years in order for purchasing to make more financial sense than renting.
Zillow’s analysis takes into account mortgage and rental payments, down payment, buying and selling costs, property taxes, utilities, maintenance costs, and tax deductions. It also adjusts for inflation, and forecasts home value and rental price appreciation. Their analysis covered more than 200 metros and 7,500 U.S. cities.
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