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Think that buying is always better than renting? Think again.
Learn to navigate the housing market, compare the advantages and disadvantages of renting and buying, and decide what's best for you.
Module Outline
Essential questions
What are the primary benefits to renting a home? What are the primary benefits to owning a home? What are some risks associated with each?
Learning objective(s)
I can use a mortgage calculator to plan mortgage payments
I can estimate yearly rental expenses
I can compare the basic costs of renting and owning a home
I can use real estate search engines to find and compare homes
I can choose to rent or buy a home based on my financial interests
Activities
Introduce
Watch: The Money Pit scene
Written response (3-4 sentences): In this scene, Tom Hanks and Shelley Long are new homeowners. What reasons do you think led them to buy this home? What are some of their unforeseen expenses?
Expose
Checkout Home Ownership Vocabulary
Throughout this module, refer to this vocabulary list whenever you hear a new term or need a refresher
Written response: Choose 5 terms that you didn’t know the meaning of and define them in your own words
For example: Mortgage-a mortgage is a loan that you take to buy a home when you cannot pay for it in full (ie. in cash). Mortgage payments are monthly payments and are usually a combination of a principal payment and interest payment. Common mortgage repayments are set at 15 or 30 years.
Complete Notes Catcher
Watch: Which is Cheaper?
Written response (4-6 sentences): Graham mentions “opportunity cost” multiple times throughout this video.
In your own words, what is “opportunity cost”? What example does he give regarding the $500,000 house?
If you were deciding on buying your own house or renting, how much would opportunity cost play into your decision? Why?
How long should you live in a home in order to make buying more cost effective than renting?
Watch: 15 vs 30yr Mortgage
Written response:
What are 3 advantages of a 15 year mortgage? What are 2 disadvantages of the 15 year mortgage?
What are 3 advantages of the 30 year mortgage? What are 2 downsides to it?
Inflation (click here if you need a refresher on what inflation is) can sometimes work in our favor. How does inflation affect the actual cost of interest on a 30 year mortgage?
Practice
Read: How much home can you afford?
Written response: In your own words, what is DTI? Why are lenders (banks) concerned with DTI when you are applying for a mortgage?
Experiment with this DTI calculator. Plug in realistic numbers for your annual salary and a car loan, credit card debt, and student loans to figure out what your DTI might be after college, trade school, etc. Take a screenshot and submit to google classroom.
Calculating how much we can afford: rent and mortgage
It’s recommended that you spend at most 30% of your income on rent or a mortgage. You can hand jam this figure if you like, but modern calculators will make quick work of estimating our buying power
Experiment with this rent calculator:
Imagine you have just graduated high school, and are making $2000 a month as a full-time employee in BV. How much can you afford to rent in Buena Vista?
Experiment with this mortgage calculator.
How much home price can you afford with an income of $40,000, no debt, and a 20% down payment?
Click the “payment” tab for a breakdown of the monthly payment
How much goes towards principal and interest?
Property taxes?
Home insurance?
Mortgage insurance?
Create (DOK)
Using Zillow or Trulia, choose 2 cities/towns in the United States to research average rent and home values
Summarize the average home value and rental value for a house/unit in the respective zip code
From one of the locations you chose, pick a house, apartment, condo, etc. that you would like to live in. Complete this analysis for both renting and buying.
Reflect
Based on your analysis, and the factors that play into owning a home or renting, would you choose to rent or buy this home? Why (4 sentences)?
Standards
Personal Finance
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