1. The Difference Between Renting and Owning a Home
Renting vs. Owning
The Difference Between
Renting and Owning a Home

2. Outline Introduction Reasons for making a housing choice
Comparison of Expenses
Renting
Advantages and disadvantages
Owning

3. Introduction Housing is the largest personal expenditure
About 1/3 of a person’s income
Choosing where to live is based upon a person’s goals, values, needs, and wants
Places to live include:
House, apartment, condo, mobile home, etc.

4. Reasons for Making a Housing Choice
Personal and financial goals
Personal values, needs, and wants
Amount of money available for housing costs
Financial resources and readiness
Credit history
Real estate prices
Location preference
Expected length of stay in particular place

5. Costs of Renting Monthly rent Security deposit
Utilities – electricity, water, garbage, etc.
Renter’s insurance

6. Moving into a Rental
Upon moving into a new place, people are usually required to pay a security deposit and sign a lease
Lease
A legal contract between the tenant and the landlord, specifying the responsibilities and rights of both parties
Identifies the rent amount, security deposit amount and specifications, payment for utility bills, late payment penalties, length of lease, eviction terms, etc.
Security deposit
An advance payment to and needed to cover anything beyond normal wear and tear on the unit

7. Renting Landlord Duties Owner of the rental property
May perform management duties or hire a property manager
Property manager - may charge a fee to the landlord to perform the management tasks
Duties
May collect rent and deposits, pay utility bills, complete repairs and maintenance, watch over the property, respond to tenant complaints, assign new tenants, etc.

8. Renting Tenant (renter) Renters are generally
The person who rents the property
Renters are generally
People who choose not to own a home
People who cannot afford to own a home

9. Other Rental Terms
If a tenant should choose to terminate their lease before the rental lease is contractually over, they will need to find someone to sublease, which is when the renter allows another tenant to take over the rental unit & pay the rent amount.
A tenant may also choose to evict a renter at any time for any reason-which means they may legally force a tenant to vacate the rental unit before the lease has expired.

10. Advantages of Renting Low move-in costs Fixed monthly expenses
Easy to move
Location choices (may be close to work or school)
Less maintenance and repair work
Fewer responsibilities
May offer extra amenities such as a tennis court or pool
Less expensive than home ownership
May be able to save for other wants or needs if renting a less expensive apartment
Other expenses may be included in rent payment such as electricity, water, sewer, and/or garbage

11. Disadvantages of Renting
Subject to terms of a lease
Rent may change with little notice
Less privacy and transient neighbors
Restrictions on noise level, pets, etc.
Fewer opportunities to upgrade apartment such as new carpet, paint, or wallpaper
When leaving a property, no equity is returned as it would be if selling a home
No tax deductions
May lose rental if the property is sold

12. Home Ownership
Home ownership - the buyer has purchased a housing unit as their own property
Goal of many Americans
A large financial decision
Owning a home is an investment because if a person sells a home for more than what it was bought for, the person makes money. This is called equity.
Financial planning and savings can assist a person in planning for the benefits of home ownership later in life

13. Costs of Ownership Monthly mortgage payments
Down payment (one time cost)
Closing costs (one time cost)
Utilities – electricity, water, garbage, etc.
Homeowner’s insurance
Real estate property taxes
Maintenance

14. Purchasing a Home 90% of buyers take out a mortgage
A home loan in which the real estate is the collateral
Collateral is an item promised to the lender if the borrower does not pay back the loan, usually the home
Down payment
Amount of money paid on the home at time of purchase
Typically 10 – 20% of the purchase price of the home
Recommended purchase price amount an individual should pay for a home
2 ½ times their annual household income

15. Types of Mortgages & Loans
Fixed Rate/Conventional
Adjustable Rate
Graduated Payment Mortgage
Loans
FHA VA
Rural
First time buyers

16. Advantages of Ownership
Build equity which can be borrowed against if necessary
Pride of ownership
Feel more comfortable and have more privacy
Stable mortgage payments
More room and storage
Improvement of buyer’s credit rating
Income tax deductions for property taxes and mortgage interest
Potential for property to increase in value
Free to make home improvements and have pets (items typically not allowed in rentals)

17. Disadvantages of Ownership
Large down payment
Move-in costs
Insurance costs
Possible for property to decrease in value
Time, money, and energy commitment
Repair and maintenance costs
Property taxes can raise substantially
Money is tied up in the home
May take several months to sell a home if trying to relocate

18. People are always paying
Keep In Mind. . .
People are always paying
for a home. It’s just a
matter of whether it is
for themselves or
their landlord.