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Is it cheaper to rent or buy a home in Colorado Springs?

Is it cheaper to rent or buy? As part of our partnership with Tim and Dave from Trusted Lending Advisors and my husband Jeremy, a local Realtor, here’s some data on whether it’s cheaper to rent or buy in the Colorado Springs housing market.

From Jeremy at The Circa Group at RE/MAX Properties:

You can buy an average priced Colorado Springs home for about $1,000/mo. So using that number, let’s see what $1,000 a month gets you in terms of a rental vs. owning your own home:

Link to homes for rent at $1,000/month
Link to homes for sale for $200,000 which is about $1,000/month
(Use the arrows at the top of the page to cycle through the listings.)

(For purposes of this comparison, I based calculations on the most common loan product my clients chose over the past year, which is a conventional loan with 5% down payment and up front PMI. I’ve used a 3.75% interest rate amortized over 30 years. Using those assumptions, and making a reasonable estimate for taxes and insurance, you could likely buy a home today for $195-200k and have a monthly mortgage payment of about $1,000. You’ll want to talk to Tim about what loan product makes the most sense for your specific situation and to check current rates.)

Bottom line – by purchasing a home, you can keep your monthly payment the same and have a much nicer home than what you could rent.

From Tim at Trusted Lending Advisors:

As Jeremy mentioned above, you can buy a very nice home for around the $200K mark, and depending on the loan program and down-payment available, in many cases can keep your payment in the $1000/month range. Other factors such as credit scores and income/debt load also affect your loan pre-approval, which is why we strongly recommend you contact us for a pre-approval before beginning the house hunting process (see our last post for more info on getting pre-approved).

We have seen dozens of clients this year buy a home for the same or less monthly payment than they pay for an inferior rental property. For example, many of our clients are paying $1200-1500 in rent for a 3 or 4 bedroom, 2-3 bathroom, 2-car garage home (depending on neighborhood, condition of the home, etc). Most of these clients have been pleasantly surprised to see their payments drop or stay the same for a comparable or nicer home.

Additionally (and without giving any “official” tax advice), it’s worth noting that as a home owner you’ll enjoy a significant tax write-off that you don’t have as a renter. 100% of the mortgage interest you pay annually, as well as some closing costs (in some cases) and monthly mortgage insurance (in some cases, subject to income limits) are tax deductions. Confirm with a CPA for exact details, but we regularly see clients buying at the $200K level experience a $2-3K larger tax refund after their first full year of home ownership. We always say that your two best tax write-offs are kids and mortgages!

Here’s another “Fun Fact” for you as well. The National Association of Realtors (NAR) statistical data reports that home owners in the US have a net worth 41 times higher than renters. This is due to the fact that as you make your mortgage payments monthly and as your home naturally appreciates over the years, you build up equity in the home which when sold will provide you with a strong return on investment.

Bottom line – if you’re happy with your current home, in most cases you could own your own home for the same or lower payment while also enjoying potential tax deductions and building equity for the future.

So whatever you goals are, whether it’s to get more house for the same monthly cost, or just save money to live in a comparable home to what you’re renting, you almost always save money by buying a home in the current Colorado Springs market.

__________________________

Thanks to Tim and Jeremy for the input!  If you’re ready to look for a home, I’d love to have you consider using Tim at Trusted Lending Advisors as your lender and my husband Jeremy as your Realtor! I know that you’ll receive exceptional service from both of them, and I’m not the only one who feels that way.

Remember that Trusted Lending Advisors is offering Springs Bargains readers a lender credit for your appraisal (up to $400 value) on any closed loan transaction!  Just mention Springs Bargains when you call Tim at (719) 266-8183 or visit the Trusted Lending Advisor website.

You can search Colorado Springs homes for sale on Jeremy’s website, with no registration required to view any information.  You can contact Jeremy at (719) 231-9043 or jeremy@thecircagroup.com.

Trusted Lending Advisors is powered by Academy Mortgage | Regulated by the Colorado Division of Real Estate | LMB 3113 LMB 100017529 NMLS 257308 | Equal Housing Opportunity

 

5 Comments
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Comments

  1. I was wondering, if you factor in average home repair expenses you might have to deal with as an owner vs. the landlord being responsible for that kind of thing if you rent, is it still cheaper to own? And, out of curiosity, what would be a reasonable amount to set aside for such expenses so that they don’t come as a surprise to your bank account!?

    Thanks for the good advice!

    • Thesa,

      That is a good question. Generally speaking, the cost of maintenance would not be so much as to change the basic conclusions above, but it certainly is something worth budgeting for. As to how much, it is almost impossible to give a general answer since it’s going to depend a lot on the age and size of your home, how well it was maintained by the previous owner, etc. That being said, if low maintenance is a particular goal for a client, we can definitely take that into account by looking for a home where major systems (i.e. roof, furnace, siding, windows, etc.) are newer or well maintained.

      In most cases, even after accounting for maintenance, it is still cheaper to own a home right now than to rent a very similar home. And that equation doesn’t even allow for the tax savings (often in the thousands annually), doesn’t count increasing equity every month as the mortgage balance is paid down, and doesn’t assume home values will appreciate. In short, the math is so overwhelming (especially with sub 4% interest rates right now) that no reasonable maintenance costs are going to change the final conclusion.

  2. I definitely agree that it is cheaper to own vs rent here! We rented a 3/2 house in a not so nice area of Colorado Springs for $900/mo for 18 months. When we bought our house (3 yrs ago), we bought a nice 3yr old house in Falcon for $140,000. Not only is the house bigger, newer, nicer, better location, but it is way cheaper. Before tax and insurance is about $650/mo. After tax and insurance, we still pay below the $900 we paid to rent. And with everything new, there is not really any maintenance costs.

  3. I would caution people that mortgage interest is NOT an automatic deduction. It is only deductible if you itemize, which means you need enough other deductions to make it worth it to itemize versus taking the standard deduction. As a married person who just refinanced our mortgage to a nice low rate, we no longer have enough deductions to do more than the standard.

    • That is correct – the mortgage interest deduction requires that you itemize. Be sure to talk to a tax professional about your specific situation. Neither your lender nor your real estate agent are experts on the 70,000+ pages of the IRS code!

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