The roommate factor is of great importance as a young adult’s method when deciding to rent or buy a home. Renting versus owning is a long standing debate among homeowners and renters. As of now, renters can easily win the debate by splitting rent with a roommate and saving. Initially, it seems to be a clear cut choice
Location is the Major Detail
So, which method is best? A consumer who purchases a starter home, or a renter who gets a roommate to pay a good share of the rent. With each other, they can split the rent on an apartment or home than either could afford to buy a home on one income.
If you and your roommate are responsible consumers, you might actually save a considerable amount of costs by divvying up the rent, rather than buy a home. But, this is true only in specific places in Colorado.
Some of the most expensive places in the country to buy homes are in Seattle and San Francisco. If you have a roommate or more than one, the costs can to owning a home can be dramatically reduced. Although, you will be qualifying based on only your income in most situations.
Updated Rent vs. Buy Calculators
No longer should calculators traditionally blindly assume that every single person interested in buying a home will not have roommates to assist in paying the mortgage. Statistics from Zumper showed that 26% of millennials have a roommate and that number is likely trending higher.
Try out Trulia’s Rent vs. Buy Calculator.
The calculator has some standard assumptions.
1.It assumes buyers would have to apply for and be approved for a 30 year fixed rate loan. If you and your roommate make an above average income, you may be able to afford the payment on a 15 year fixed loan and build equity faster.
2. The down payment is 20% but this can be adjusted to your needs in dollar amounts to customize your financing plans.
For the most part this calculator makes a lot of sense for first time home buyers who will have roommates.
How Renting With A Roommate Compares To Buying A Home
For example, with a 10-percent down payment in Denver and Boulder, the savings from sharing a 3 bedroom rental compared to buying a home are 29% and 34%, respectively. With a 15- or -20-percent down payment, the savings lessen even more.
However, home price appreciation in Denver and Boulder has risen by as much as 8.9% and 9.1% in the last year. That figure amounts to approximately $40,000. That’s not something you’d experience as a renter. Over the long term, many can agree that owning is better than renting.