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Buy vs. Rent

Many people have asked us, "should I consider buying a home or just stick with renting?" There are some pretty strong numbers that suggest buying a home is a far better financial decision.  First, it is important to familiarize yourself with the "breakeven" point; you hit the breakeven point when the amount of money you invest in your new home is the same as what you would have spent renting. Colorado's breakeven point is just over (2) years. After you reach this point, you will be spending less on your mortgage then you would if you were renting that same home. Not only are you building equity in your first (2) years as a homeowner, but after your breakeven point you continue to build equity and are saving money every month. Keep in mind, the price and area in which you purchase your home will affect your "breakeven" point. 

Here are some other "breakeven" points all across the US:

  • Nationwide Breakeven Point: 1.96 years
  • Los Angeles - 3.7 years
  • Memphis -1.32 years
  • Philadelphia - 2.9 years
  • New York - 5.2 years
  • Phoenix - 2.1 years

Zillow estimates a unique Breakeven Horizon for up to 3,000 individual homes pulled randomly from various ZIP codes. They then use the Zestimate (Property value estimated by Zillow) and Rental Zestimate on the same houses, therefore we’re able to consider the costs of buying a house against the costs of renting that same house.

The following are criteria Zillow uses to pull specific Breakeven Horizons for different zip codes:

  • A 20% down payment
  • Monthly payments on a 30-year fixed rate mortgage at the current interest rate for people with credit ratings between 680 and 740
  • Property taxes
  • Homeowner’s insurance
  • 3% of purchase costs
  • 8% selling costs (because that’s how owners realize the gains)
  • Annual maintenance costs equal to 1% of the home’s value
  • For condos, 1.2% a year in HOA fees
  • Home appreciation forecasts
  • Federal tax deductions

For renting Zillow assumes:

  • A deposit equal to one month’s rent
  • Rent payments
  • Renter’s insurance
  • 5% annual investment gains on money that would have been used as a down payment or gone towards other homeowner expenses the renter avoids


So if you have been considering buying a home and have had some reservations, these facts don't lie and now is the time to buy!


Information provided by The Denver Channel, See Link Below: By Lindsey Scholl - Mar 19, 2019

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