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.