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Date Submitted: 04/14/2011 04:53 PM
Renting versus Buying
Renting an Apartment is a Better Option than Buying a House
Jessica Alby
jalby1@gmail.com
University of Chicago
Renting versus Buying
Introduction
In this economy, renting an apartment is a better choice than buying a home. “Homeownership has traditionally been known as the “American dream”, and anyone not in pursuit of it was assumed to be either transient or not able to measure up financially.”(Johnson. 2011, p. 1). Many Americans dream of owning a beautiful home with a white picket fence, two children, and a dog. They believe that home ownership provides a strong foundation for building wealth. Although the price of homes has decreased, renting is a better option than buying a house.
Cost of Ownership
According to Leonhardt (2005), owning a house often ties up hundreds of thousands of dollars that could be invested more safely and more lucratively elsewhere over the next decade. In addition, real estate brokers hate to acknowledge that home ownership involves its own version of wasting money, like property taxes and the cost of borrowing. Many people forget that when they buy a home, especially the first 10 years or so, they pay a lot of interest and are really ‘renting’ the house from the bank. Homeowners also have to pay for maintenance, property taxes, and insurance.
Owning a home today is more expensive than renting. For example, If Stacy buys a home for $120,000, makes a down payment of 5% ($6,000), and takes out a mortgage at 6% for 30 years for $114,000. Her monthly payments would be $683.49. The first payment will consist of $113.49 going to the...