Financial Readiness

Moving

Buying vs. Renting: Conventional wisdom is that buying is better in the long run. But you have to commit to living in the same home for 5-10 years minimum (regardless of any life changes) to see a financial advantage. See the following approximation of buying or renting a $135,000 home for 6 years, given a 0% housing/renting market change.

  • Buying: A 10% down payment and closing costs are $17,500. You have an $880 a month mortgage/tax/insurance or $63,360 over six years, but you can subtract a $7,200 tax credit. Add the cost of fixing/upgrading of $800 a year, or $4,800 over six years. After six years, you would have $25,930 in equity, but selling costs will leave you with $15,330. Total cost: $63,130.
  • Renting: $950 a month rent and $10 for renters insurance, costs $69,120 over six years. During that time, you earned 2.5% interest on your $17,500, leaving you with $19,740 after taxes.Total cost: $49,380.
  • Because the cost to buy/sell a house takes so long to recoup, buying is a long term commitment and potentially risky (if the market falls, you lose/change job, or repairs become too costly). If the market is rising 2% per year, six years would be the break-even point in this example. Buying a home is a better financial decision if you own for longer, the rental costs in your area are inflated, and/or the market is rising (no one can predict this). A larger down payment will help, but only if you have no other debt. Both renting and buying are fine choices if you run the numbers for your situation.

Finding a Rental: Use craigslist.com, Apartment Finder/Guide (online or at shopping centers), apartments.com, move.com, the newspaper, or local realty company. Read the lease!!! If you don’t understand something, ask. Moving to a new city - try a cost of living calculator.

Movers: If you need help moving, call a moving company or a university that has students willing to help. Also, you can get free boxes from grocery stores and ABC stores.

Change Addresses: Credit Cards, Bank Accounts, Student Loans, Insurance Companies, Retirement Funds, Magazines/Newspapers, DMV (car regist. & license), Post Office, IRS, Cable/Satellite and Internet, Phone, Utilities.

Renters Insurance: At about $10 per month, it covers personal property inside the home, and often it covers lawsuits against you due to accidents, injury, or property damage.

Housing/Apartment Checklist: Visit during the day, night, and weekend to evaluate the following:

  • Location and Neighborhood
  • Carpet and Floors
  • Paint, Walls and Ceiling
  • Water Damage (bathroom, kitchen, under sinks)
  • Doors (do they open/close easily)
  • Noise Level
  • Windows, Screens and Blinds
  • Pests
  • Parking
  • Security and Lighting
  • A/C and Heating
  • Appliances and Garbage Disposal
  • Water Pressure and how Hot/Cold it is
  • Toilet Flushes Properly
  • Cell Phone Reception
  • Amenities (fitness room, pool, laundry, etc.)
  • Security Deposit
  • Penalty for Breaking Lease
  • Pet rules/deposit
  • Commute During Busy Times
  • Ask for average utility costs
  • Ask neighbors what they think

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