Rent vs Own in Harrisonburg


Rent vs Own in Harrisonburg
By Scott Rogers • February 6, 2009
A common question I am asked is how costs compare in buying versus renting a "starter townhouse" in Harrisonburg. This changes over time, but here's how the costs compare now, assuming that you stay in the property for three years.... Buying a townhome at $156K (example) With a 3% down payment, you'll be financing $151,320, and at current interest rates (5.00%), this will equate to a $922 monthly mortgage payment. This $922 will include the principal, interest, taxes and insurance. You will likely pay $4,000 of closing costs to buy the townhome. During your three years of ownership you will have saved approximately $5,000 on your taxes because of the mortgage interest you have paid. After three years you will have paid off approximately $7,000 of principal on your mortgage. Thus, you have a net (unrealized) gain of $8,000 ($5k tax savings + $7k principal reduction - $4k closing costs). Renting a comparable townhome To rent a comparable townhome, you will likely be paying $900 per month. You will have no up front costs, no tax savings during your time of ownership, and no financial return at the end of the three year time frame. Three Year Conclusion If you are only going to live in your townhome for three years, you will still need to carefully consider whether you should buy vs rent. Even though you will have $8,000 of savings, you will burn through much of that in the transaction cost of selling your townhome. Five Year Conclusion If you're in the townhome for five years, it becomes a much better opportunity to have purchased. In the five year analysis, you will have a net (unrealized) gain of $17,000 ($9k tax savings + $12k principal reduction - $4k closing costs). Deciding whether to buy or rent is a big decision, but it can be made wisely with some basic financial analysis. Feel free to call (540-578-0102) or e-mail me (scott@cbfunkhouser.com) if you'd like some guidance for your personal situation. Receive Updates by Email Recent Articles: Ho, Ho, Ho, Is Santa Bringing Lower Mortgage Interest Rates For Christmas? OK, False Alarm, Most Homes Are Still Selling Very Quickly How Quickly Are Homes Selling These Days? Middleburg at Stone Spring, To Include Up To 500 Apartments, Proposed Adjacent To The Reserve At Stoneport A Rough Two Years For Rising Mortgage Interest Rates Home Buying Activity Will Slow But Not Stop Over The Winter Demand Is Likely To Keep On Rising For Contractors And Home Renovators Update On City Of Harrisonburg Townhouse Market Trying To Buy A Home... A Story Of Being All In, Then Bowing Out, And Now Being Ready To Jump In Again Sometimes Upgrade Your Home (Selling And Buying) Results In An Even Larger Upgrade In Your Monthly Payment
Have any questions? Contact Scott Rogers at 540-578-0102 or scott@funkhousergroup.com
Based on information from the Harrisonburg-Rockingham Association of REALTORS® or its MLS, for the period Jan 1, 2000 through Dec 11, 2023 (unless otherwise noted).
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