Many people looking to move think about whether they should buy or rent? There are many positive and negative aspects to both sides. Some major things to consider is how long you plan on living there, your credit score and if you have extra money aside for a down payment and closing costs. If you plan to live somewhere for three years or less I would suggest renting. I say this because if you plan to live there for a short time the home won’t have appreciated very much, and you could easily lose money since you have all the costs associated with buying and selling. Unless of course you are in a really hot market where homes are appreciating at a high rate. On the other hand, I have seen many people especially members of the military who move often, buy a home and then rent it out. This allows the home to still appreciate while the mortgage is being taken care of by renters.
Your credit score is another very important factor. Your first step is to take a look at your credit score. You can do this online through credit 
karma, free credit report, or any other legit websites. If you have a negative credit score, anything in the 500’s or lower, you will need to wait until you have improved this score. If you’re not sure on how to improve your score, talk to a mortgage lender and they can point you in the right direction. If you do have a score of 600 or higher, talk with a lender and see what you can get pre-approved for. You might think you can afford a house for $250K, but a lot of the times it might be lower than what you expected. This is not necessarily a bad thing. They do this to ensure you can make the monthly payments. A pre-approval letter is required for realtors to have in order to show you homes in your price range.
Not only would you need a good credit score to buy a house, but you will also need extra money for a down payment as well as closing costs. A lot of people use FHA loans where you are required to pay 3.5% down, so on a $200K house you would be putting at least $7,000 down. A conventional loan requires between 5-20% down payment, so 
for the same priced house you would need up to $40,000. There are a few other loan options available as well. On top of a down payment, you will also be paying closing costs. There are times where the seller will help pay for some closing costs, but usually that cost ranges between 2-5% of the home value. For example, in a $200K house you would pay around 4,000-10,000 in closing costs. All together that would be a minimum of $11k needed to purchase a $200k home.
So let’s say you did have good credit and extra money in savings. You still have to weigh the options of buying vs. renting. Buying can be very expensive especially since you have to pay interest on your loan. Interest rates very depending on which lender you use, your credit score, and the economy. To get the best rate try to get your credit score as high as you can and compare mortgage lenders rates. On the other hand, when you buy a home the value will rise over time and when it comes time to sell you are getting a lot of that money you paid back.
Let’s go over the following scenario of buying vs. renting. Let’s say a house you are interested in costs $170,000. You have good credit, so the interest rate is 3.875%. The mortgage with escrow (including insurance and taxes) is $950 a month. According to the home evaluation link on our website GreenvilleRealEstateHub.com, the same house could rent for $1,370 a month. That is a difference of $420 each month. Keep in mind that these amounts are all estimates.
Renting
$1370 x 12 = $16,440 x 5 = $82,200 for five years
$1370 x 12 = $16,440 x 10 = $164,400 for ten years
$1370 x 12 = $16,440 x 15 = $246,600 for 15 years
Buying
$6,000 down payment, $500 inspections, $3,400 closing cost
=Total of $9,900
$950 x 12 = $11,400 x 5 = $57,000 + $9,900 = $66,900 for five years
$950 x 12 = $11,400 x 10 = $114,000 + $9,900 = $123,900 for ten years
$950 x 12 = $11,400 x 15 = $171,000 + $9,900 = $180,900 for 15 years
Your home will also increase in value each year, as long as you keep 
up the maintenance. There are many situations where the value of the home stays the same or decreases over time so keeping it up to date as well as having positive development in your city are very important factors. The annual average is an increase of 4%. In five years your home could value around $200K. In ten years that value could be up to $230K and in 15 years your house could value $270.
With buying you also would sell eventually. Sellers have the responsibility to pay for the commission of their agent as well as the buyers agent. So lets add this into our calculation. The average commission is 6%, so in five years if your home value increased to $200K you would have to pay $12K. At $230K the commission would be $13,800 and at $270K you would pay $16,200.
During this time, you have been paying off your mortgage. The down side is that out of the $950 you pay each month, only about $275 is actually going to principle. The other is interest and escrow. So lets do the math. Loan started off at 170K. Then you payed $6K down making it $164K.
Let’s calculate what your mortgage balance is after 5, 10 and 15 years.
$275 x 12 = $3,300 x 5 = $16,500 Your loan amount after 5 years is $147,500
$275 x 12 = $3,300 x 10 = $33,000 Your loan amount after 10 years is $131,000
$275 x 12 = $3,300 x 15 = $49,500 Your loan amount after 15 years is $114,500
If you sell after 5 years you would have $147,500 left on your mortgage. Plus, the $66,900 you have already paid as well as about $12K in commission you have to pay in order to sell. This amount adds up to $226,400. Now let’s deduct the sale price of your home at $200K. That leaves you with only having paid $26,400 in five years. If you go back up to our renting equation you will see that you would have paid $82,200. This is a difference of $55,800 in five years! Clearly the better option here is to buy.
Now let’s look at the math to see the difference if you sold your home in 10 years. You would have $131K left on your mortgage. Plus, $123,900 you paid as well as $13,800 in commission. That total is $268,700. Now subtract the sales price of $230K. That amount adds up to only $38,700 in 10 years vs. $164,400 if you would have rented. That saves you $125,700!
Lastly let’s see your savings for the 15 year period. You would have $114,500 left on your mortgage, $180,900 that you paid, and $16,200 in commission. Totaling $311,600. Minus the sales price of $270K, adds up to $41,600. Your rent amount would be $246,600. Saving you a whooping $205K.
Look at the overall comparison
Renting for 5 years - $82,200 Buying then selling after 5 years - $26,400
Renting for 10 years - $164,400 Buying then selling after 10 years - $38,700
Renting for 15 years - $246,600 Buying then selling after 15 years - $41,600
There are always going to be things that you have to pay for as a buyer that you wouldn’t as a renter. If anything gets broken or if you have to replace flooring, roof, HVAC, etc. But even with all those repairs you would still be saving so much money overtime. Your scenario isn’t going to match the above one. Your savings will vary by your interest rate, the type of loan you choose and the terms of the loan, but at least you now have an idea what the price differences over time could be.
Read our full guide: Moving to Greenville SC: The Complete Relocation Guide to Greater Greenville Upstate South Carolina
If you have any interest in buying or selling, we would be more than happy to help. PRODUCER Realty can get your home sold in less time and for top dollar. We deliver exceptional results for our clients by providing world class service. Call PRODUCER Realty today at 864-438-5050.
