Home Buying Tips
Lessons From a First-Time Home Buyer: Comparing Our Mortgage to Rental Options
When we decided to buy a house, a huge consideration was how much we’d be spending on a monthly basis. Sure enough, once you factor in our mortgage (complete with 7.999% interest), insurance, and property tax, our monthly payments were an increase from what we were paying for our apartment, coming in at around $1,500. Thankfully, we’ve been able to manage this increase — but that hasn’t stopped me from wondering how our payment compares to other options.
Well, as luck would have it, there are a couple of houses in our small neighborhood that are listed for rent. Being curious, I decided to dive into these listings for a closer look. So, what did I learn? Let’s take a look.
What We Pay
Before we get into these listings, I should probably catch you up on our rough monthly expenses. As mentioned, our mortgage plus insurance and taxes comes to about $1,500 a month. Then we pay $80 for Internet, while utilities (electric, gas, and water) come in between $150 and $220 a month. We also pay $20 a month for trash service.
I mention all of this because some listings bundle a few of these expenses in. Thus, this way, we can get a more apples-to-apples comparison.
House #1
A couple of months ago, we noticed that the house across the street from us was up for sale. After the transaction closed, we even saw the new owners having some assorted work done. Yet, after a few days of this, a “For Rent” sign went up outside.
Oddly, when looking on Zillow, the address of this house isn’t disclosed. Nevertheless, I can see that it’s listed for $1,200 a month. While that’s $300 less than our total monthly payment, there are a few things to note. First, according to the listing, this expense doesn’t include utilities or trash service. On top of that, there’s a $500 pet fee plus $25 a month in pet rent. They also state that tenants are responsible for renters insurance, although it’s unclear if a policy is required. I’ll also point out that this house is smaller than ours, with two bedrooms and 1.5 baths versus our three bedrooms (well, two bedrooms plus a finished basement) and 2.5 baths.
House #2
Another house in the area is also for rent — this one asking $1,450 a month. In this case, the house is a comparable size to ours and the landlord is offering WiFi for the price. I’d also say that the property has a few updates that ours lacks, so it feels a bit more modern.
However, like with the last listing, utilities (beyond Internet) aren’t included. It also doesn’t specify whether pets are allowed or if there’s a fee.
Our Old Apartment
Finally, I was curious to check in and see what our former one-bedroom apartment was renting for these days. I actually wasn’t expecting too much of a hike since, every time I drive by these days, they seem to add more signs and flags advertising availability. Despite that, it seems that our floor plan is currently renting for $1,410. That’s up from the $1,200 we were paying when we moved out.
Granted, this figure does include Internet and water. Plus, with the apartment being much smaller than our house, the property installing solar panels, and the share of the electric bill being based on the square footage of the unit, the utilities there would surely be less than half of what we pay now. Then again, that would be offset by the pet rent we’d need to pay — plus, there’s also renters’ insurance to consider.
One of the main reasons we decided to buy a house was that we wouldn’t have to worry about our landlord randomly raising our rent. And while our monthly house payments did increase a bit due to higher insurance rates, it’s clear that this logic has proven sound so far. What’s more, should interest rates eventually fall, we could potentially refinance and end up spending hundreds less per month.
Overall, I found looking at these rent figures to be encouraging. For example, looking at the first house, the $1,200 rent is only slightly lower than the $1,290 we pay for the mortgage portion of our monthly expenses. In exchange for that $100 a month plus property taxes, we get to work toward owning our house outright, whereas renting would lead us to… paying more rent.
Obviously, this isn’t the only factor that determines whether or not buying a house is worth it. Still, looking at other options now, I’m only further convinced that we made the right choice.
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