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To rent? To lease? To buy? Oh my! . Ms. Lewis Personal Finance 12/2/13. Renting an apartment/house/condo. Advantages: Few up-front costs Ability to move frequently or suddenly Helps to set a monthly budget No unforeseen maintenance expenses . Renting an apartment/house/condo.
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To rent? To lease? To buy? Oh my! Ms. Lewis Personal Finance 12/2/13
Renting an apartment/house/condo • Advantages: • Few up-front costs • Ability to move frequently or suddenly • Helps to set a monthly budget • No unforeseen maintenance expenses
Renting an apartment/house/condo • Disadvantages: • No ownership • No equity • Monthly rent can go up at any time • Equity: The monetary value of a property, ownership of the property
Buying an apartment/house/condo • Advantages: • Ability to build equity • Home owner tax breaks and credits • With a fixed rate mortgage, your payments stay the same each month • Mortgage: Mortgages are used by individuals and businesses to make large real estate purchases without paying the entire value of the purchase up front. Over a period of many years, the borrower repays the loan, plus interest, until he/she eventually owns the property free and clear.
Buying an apartment/house/condo • Disadvantages: • 5% down payment • Related closing costs • Must have money saved to withstand losing a job, long-term illness, financial set backs • Responsible for all costs related to maintenance
Qualifications to Rent Credit check References
Qualifications to buy Complete a mortgage loan application Personal information must be shared (criminal background check) Employment information (where you are working, pay stub) Assets and liabilities Good credit
The Four C’s Credit Capacity to make payments Capital or cash reserves Collateral: The property you buy will get an appraisal to determine market value
Fees associated with renting Security deposit Monthly rent Additional monthly fees Annual rate increases
Fees associated with buying Down payment Purchase price Closing costs Annual property taxes Annual maintenance costs Interest rate Home inspection Title charges Mortgage insurance
Can a payment plan be changed when you are renting? • Yes, but only IF: • The land lord agrees to let you negotiate an early end to your lease • You agree to a payment plan that fits your present situation
Can a payment plan be changed if you bought a home? • Yes IF: • You have an adjustable rate mortgage • You renegotiate to get lower interest rates • You consolidate your debt • Adjustable rate mortgage: The initial interest rate is normally fixed for a period of time after which it is reset periodically, often every month.
Leasing a Car • Advantages: • Low up-front costs • Low or no down payment • Low monthly payments • Maintenance costs are next to nothing: warrantees • Purchase option: ability to buy the car once the lease is up
Leasing a Car • Disadvantages: • Insurance rates are usually higher • If the car requires a down payment, you’ll have to pay that each time you get a new lease • Wear and Tear fees • Mileage • No equity
Buying a Car • Advantages: • New car • Ownership • Owning a car for ten years is actually cheaper than leasing it • Once the car is paid for you no longer have to make monthly payments on it
Buying a Car • Disadvantages: • Down payment • Monthly payments must be made until the car is paid off • Value of the car depreciates the minute you drive off the lot