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

2. 9.3.G1 © Family Economics & Financial Education – Revised November 2004 – Housing Unit – Renting vs. Owning a Home Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman Outline Introduction Renting – Advantages and disadvantages – Costs of renting Owning – Advantages and disadvantages – Costs of owning Reasons for making a housing choice

3. 9.3.G1 © Family Economics & Financial Education – Revised November 2004 – Housing Unit – Renting vs. Owning a Home Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman 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. 9.3.G1 © Family Economics & Financial Education – Revised November 2004 – Housing Unit – Renting vs. Owning a Home Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman Renting Rent – The cost of using someone else’s property Renters are generally – People who choose not to own a home – People who cannot afford to own a home

5. 9.3.G1 © Family Economics & Financial Education – Revised November 2004 – Housing Unit – Renting vs. Owning a Home Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman Renting continued Landlord – 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.

6. 9.3.G1 © Family Economics & Financial Education – Revised November 2004 – Housing Unit – Renting vs. Owning a Home Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman Moving into a Rental Upon moving into a new place, people are usually required to pay a security deposit and sign a lease Security deposit – An advance payment to cover anything beyond normal wear and tear on the unit 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.

7. 9.3.G1 © Family Economics & Financial Education – Revised November 2004 – Housing Unit – Renting vs. Owning a Home Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman Costs of Renting Monthly rent Security deposit Utilities – electricity, water, garbage, etc. Renter’s insurance

8. 9.3.G1 © Family Economics & Financial Education – Revised November 2004 – Housing Unit – Renting vs. Owning a Home Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman Advantages of Renting Low moving 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

9. 9.3.G1 © Family Economics & Financial Education – Revised November 2004 – Housing Unit – Renting vs. Owning a Home Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman 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

10. 9.3.G1 © Family Economics & Financial Education – Revised November 2004 – Housing Unit – Renting vs. Owning a Home Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman Home Ownership Home ownership - the buyer has purchased a housing unit as property – Goal of many Americans – A large financial decision If it is not possible at this time, sound financial planning and savings can assist a person in planning for the benefits of home ownership later in life

11. 9.3.G1 © Family Economics & Financial Education – Revised November 2004 – Housing Unit – Renting vs. Owning a Home Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman Purchasing a Home 90% of buyers take out a mortgage – A home loan in which the real estate is the collateral Down payment – Amount of money paid on the home at time of purchase – Typically 10 – 20% of the purchase price of the home Maximum amount an individual should pay for a home – 2 ½ times their annual household income

12. 9.3.G1 © Family Economics & Financial Education – Revised November 2004 – Housing Unit – Renting vs. Owning a Home Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman Costs of Ownership Monthly mortgage payments (includes taxes and insurance) Down payment Closing costs Utilities – electricity, water, garbage, etc. Homeowner’s insurance Real estate property taxes Maintenance

13. 9.3.G1 © Family Economics & Financial Education – Revised November 2004 – Housing Unit – Renting vs. Owning a Home Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman 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)

14. 9.3.G1 © Family Economics & Financial Education – Revised November 2004 – Housing Unit – Renting vs. Owning a Home Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman Disadvantages of Ownership Large down payment Move-in costs High 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

15. 9.3.G1 © Family Economics & Financial Education – Revised November 2004 – Housing Unit – Renting vs. Owning a Home Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman 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

16. 9.3.G1 © Family Economics & Financial Education – Revised November 2004 – Housing Unit – Renting vs. Owning a Home Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman Keep In Mind... People are always paying for a home. It’s just a matter of whether it is for themselves or their landlord.