Rent of buy

Many young couples are comparing buying a home vs renting a home. The average home in Hastings cost $330,000 and is 2,100 sq ft in size. For a conventional loan this means 3% down or $9,900. The monthly payment on a 7%, 25-year loan is $2,263 for principal and interest. Include $2,600 for property tax, $1,500 for home owners’ insurance and $140 for mortgage protection insurance for a total monthly payment of $2,744. The average rent for a three-bedroom home is $2,100. For a home owner the cost of interest, taxes and insurance is deductible and saves about 20% in federal and state income tax. This brings the monthly net payment down from $2,744 to $2,195. At the end of the first year the house has gone up in value by 3% which is $9,900 in unrealized profit. This offsets the down payment. Most young people should save for a down payment as the long-term benefit increases as the property value increases. Over time the value of housing has increased 3% per year. The law allows gift money to be used as down payment. The question for grandparents is, would you rather give your grandchild $10,000 for a down payment on a home while you’re living or give them $10,000 in your will after your dead.